In this chapter, we discuss when, how, and why trust and trustworthiness arise to support cooperation within and across organizations. To do so, we first define trust and trustworthiness, discuss how they can be quantified and determine key components of trusting and trustworthy behavior. In addition, we identify building blocks of trust and trustworthiness and offer tangible insights about how to establish trusting and cooperative business/inter-organizational relationships, based on both academic research and case studies from across industries. We all know that trust and trustworthiness matter in almost all aspects of our relationships, business or otherwise. Our friends, foes, family, colleagues, sociologists, management scientists, and even economists recognize this fact (even though some may not acknowledge it). We innately believe being trustworthy is a virtue (or, at least, are taught to think so) and have learned whether and when to trust (to the best of our abilities). And when we trust, we put ourselves in a vulnerable situation (i.e., we take a risk) based upon the expectation that the person we trusted (trustee) behaves in a positive way that is rewarding to us (as trustors). So, we make a risky “investment” of some sort and face uncertainty in the outcome (and may even regret later) when we trust. We also perhaps adjust our trusting and trustworthy behavior depending on the target of our trust, given the relevant context. For example, we may trust our significant other that he or she will return the $250 (or the car) we lend him or her (perhaps with an implicit or explicit expectation of a positive return beyond the actual loan). We probably would not ask him or her to write a contract before lending our car. However, most of us would perhaps require a marriage certificate (a binding contract that can only be annulled after a legal hearing) accepting all requirements governing a marriage before we commit “to have and to hold from this day forward, for better, for worse, for richer, for poorer, in sickness and health, until death do us part...” and ensure that we provide and receive the care and commitment in the presence of conflicting objectives that we will all face during our marriage. Similarly, most successful business and economic relationships are built upon a considerable degree of mutual trust and trustworthiness. As Nobel Laureate Kenneth Arrow wrote, “Virtually every commercial transaction has within itself an element of trust” (Arrow 1972). Trust has been the glue for most transactions within and across cultures as long as humans have socialized and transacted. Business owners and practitioners are not oblivious to this fact. They do not begin talking with a potential partner by first writing a complete set of contracts stipulating all 1 Note that you neither need a marriage certificate nor need to rely on trust if (the big if) your spouse’s and your objectives are and will be perfectly aligned with absolutely no uncertainty 100% of the time during the span of your life. Similarly, in such a case, there is no need for a preor post-nuptial agreement.

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Trust and Trustworthiness

This review examines supply chain risk publications across nine prestigious management, operations, and supply chain journals with respect to exploring trends and emerging topics. Using a refined set of keywords, we extract and filter the most relevant supply chain risk management (SCRM) articles from Scopus between 2001 and 2019. Unlike previous reviews of the SCRM literature, our methodology utilizes both bibliometric and co-citation analyses of publications in selective management and operations and supply chain management journals. In addition to analyzing the current state of the SCRM literature via bibliometric analysis, we delve deeply into the clusters of literature informing SCRM studies through a co-citation analysis. By conducting a text analysis on these clusters, we identify the main themes and provide insights regarding article relevance, theoretical frameworks, and methodologies for each cluster. In addition, we categorize the themes within each cluster into three main groups of Matured, Developing, and Emerging. Based on the identified Emerging categories, we provide detailed discussions on the promising avenues for research and practice in three main areas of Sustainable SCRM, Behavioral SCRM, and nascent methodologies and theories in SCRM studies. Finally, we dedicate a section in our review to discussing the direction of SCRM research during and after the COVID-19 era. This article is protected by copyright. All rights reserved.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/deci.12470

A Review of the Existing and Emerging Topics in the Supply Chain Risk Management Literature

Behavioral operations research has proliferated greatly over the decade since its first formal review in 2006. The growth of the field warrants an objective mapping of contributions to the literature and the identification of trends. We conduct a systematic review of the literature of behavioral operations and supply chain management (BOSCM) across eight key operations and supply chain management journals, with publication dates through the end of June 2018. Collected articles are categorized into 12 operations contexts as well as emerging topic considerations. Key research trends, theoretical foundations, and methodological choices are discussed in each context. The results show that supply chain management, inventory management, and procurement/auctions have been the most popular operations contexts for BOSCM researchers. The results of our co-citation analysis shows that the fundamental research areas that have informed and shaped the field include supply chain risk management, marketing, cognitive psychology, and social psychology. Based on these findings and a survey of the most prolific authors in the field, we discuss possible avenues for future research.

Behavioral Operations and Supply Chain Management–A Review and Literature Mapping

Data sharing between upstream and downstream entities is vital for the success of a supply chain. However, distrust, privacy concerns, data misuse, and the asymmetric valuation of shared data between entities often hinder data sharing. This problem calls for a secure, efficient, fair, and trustworthy data‐sharing mechanism. The key to such a successful system hinges on how to trace the data usage, determine the value of the seller’s data to the buyer and then compensate the seller accordingly. To this end, we design and implement a blockchain‐enabled data‐sharing marketplace for a stylized supply chain. We demonstrate how a blockchain can be used to overcome these impediments in supply‐chain data sharing and provide a detailed tutorial with a step‐by‐step implementation for how to set up such a data exchange prototype using Hashgraph.

Blockchain-Enabled Data Sharing in Supply Chains: Model, Operationalization, and Tutorial

Behavioral operations is now an established and fundamental research field dedicated to understanding how the behavior of managers, workers, and customers influences operational decisions and outco...

Behavioral Operations: Past, Present, and Future

In environments with uncertain demand, companies must rely on forecasts to plan and execute their internal supply processes. A phenomenon frequently observed in practice is that demand forecasts are systematically too high. One reason could be incentive systems that motivate employees in Marketing/Sales to maximize their sales volume. In this respect, inflated demand forecasts are a means to ensure sufficient inventory and to minimize the risk of shortages. The objective of this thesis is to design incentive systems that lead to accurate and unbiased demand forecasts. 

We motivate and contextualize our research question by the practical case of a company in the pharmaceutical industry. To analyze the results of the case study more systematically, we transfer the forecast information exchange into a game-theoretic model. In an environment with stochastic demand, a (better informed) Sales department sends a forecast to an Operations department. To incentivize truthful forecast information sharing, the incentive system of Sales contains a penalty for forecast errors. The utility functions are grounded in behavioral theories of mental accounting, loss aversion and lying aversion. We formalize the setting as a signaling game and derive the Pareto-dominant separating equilibria of the game. In laboratory experiments, we observe behavior that deviates substantially from expected-payoff-maximizing behavior in the directions predicted by our behavioral model. Based on our theory and estimates for the behavioral parameters of our model, we design forecast-error-based incentive systems for truthful forecast information sharing. We validate their effectiveness in a new experiment with out-of-sample treatments and out-of-sample subjects. We further confirm the robustness of our model by additional experiments and analyses.

Lisa Scheele

Papers

Designing Incentive Systems for Truthful Forecast Information Sharing Within a Firm. Case Study, Theory and Experiments