Written by Economists and researchers have long studied consumer thought and decision-making in order to understand supply and demand.
They’ve uncovered a phenomenon called the “bullwhip effect.”
This is a supply chain event where small oscillations in demand at the retail level result in increasingly larger oscillations in demand at other supplier levels, such wholesale, distributer, raw material, and manufacturer levels.
When you consider this phenomenon, visualize the cracking of a whip.
A small flick of the wrist sends a wave outwards.
Panic-Buying & The Market
One example of the bullwhip effect is panic-buying.
Consider the instinct to buy up all the toilet paper and hand sanitizer during the COVID pandemic.
As stores struggled to keep their shelves stocked, orders increased, and manufacturers worked hard to meet that demand.
But eventually, they overproduce, as consumers stop panicking and ease up on the supply.
This is one way the bullwhip effect manifests.
But does our cultural thinking orientation influence this, as well?
Researchers of this study were interested in the dynamics of a culture’s holistic versus analytic thinking orientation – and what its relationship is to the bullwhip effect.
The Hypothesis: Holistic Thinking Reduces Bullwhip Effect
The hypothesis of the study posits that a stronger holistic thinking orientation might be associated with a reduction in the bullwhip effect.
This is because holistic thinkers tend to make more extensive use of information, and higher reported information use might also be linked to a reduced bullwhip effect.
The Study’s Results: The Short Answer is ‘No’
Using the “beer game” – a simulation designed around the complexities of supply chain management – researchers found no evidence supporting the hypothesized relationship between the overall holistic versus analytic thinking orientation and the bullwhip effect.
One possible explanation for this lack of correlation could be cognitive limitations faced by individuals when dealing with an abundance of information in the beer game.
If both holistic and analytic thinkers have similar cognitive capacities, neither thinking orientation may have an advantage in handling the overwhelming information.
As a result, even if holistic thinkers focused more on contextual information, they might not integrate it into decision-making to a greater extent than analytic thinkers due to these cognitive constraints.
This is further supported by the finding that the thinking orientation did not correlate with the reported use of information, indicating that both groups utilized available contextual information similarly.
What the research found was that thinking orientation didn’t impact this relationship on the whole…although, it did impact the decision-making of different subdomains of thinkers.
The Subdomains
A negative correlation was observed between a specific subdomain of the holistic versus analytic thinking orientation and the bullwhip effect.
This indicates that certain aspects of decision-makers‘ thinking styles might indeed influence supply chain variability.
When considering the subdomains of the holistic versus analytic thinking orientation, the relationship between the subdomain concerning causal attribution and the bullwhip effect stood out.
Decision-makers who assumed less complex causal relationships performed worse in terms of the bullwhip effect.
Moreover, the study revealed that holistic thinking did not correlate with reported information use.
Instead, only the reported use of specific information demonstrated a negative association with the bullwhip effect.
This finding implies that the nature and relevance of the information being utilized might be critical in mitigating supply chain fluctuations.
This study of the dynamics within supply chains can serve as a basis for developing more effective strategies to manage demand variability.
A balanced combination of holistic and analytic thinking might yield the most beneficial outcomes, with a focus on immediate processes (analytic thinking) while considering more distant processes to some extent (holistic thinking).
Success Across Cultures 