Does Advance Warning Help Mitigate the Impact of Supply Chain Disruptions?

Disruption-related risk management is getting a wider attention in supply chain research. Literature often perceives proactive risk management (e.g., advance warning of a possible disruption) as a better approach than reactive... [ view full abstract ]

Disruption-related risk management is getting a wider attention in supply chain research. Literature often perceives proactive risk management (e.g., advance warning of a possible disruption) as a better approach than reactive risk management. In this research we attempt to address two research questions: (i) Does advance warning of disruption necessarily help? (ii) Does advance warning provide similar benefits for both upstream and downstream disruptions? We conduct a laboratory experiment with a setup similar to the traditional beer distribution game and report the preliminary results of our experiment. Advance warning of disruption causes over-reaction that results in higher order volume than that in no-warning cases. Particularly for the downstream disruptions (i.e., at the retailer), the over-reaction worsens the overall supply chain performance.