Kulicke and Soffa Industries Supply Chain

...

First of all, hoarding and phantom ordering are closely related; they both destabilize the efficiency of supply chains. Hoarding occurs when customers overstate their orders during a period where shortage is expected, and the effect ripples throughout the supply chain. Phantom ordering happens because customers order more than they need, or order from multiple suppliers to be sure to have what they want, knowing that they will purchase only one and will cancel orders from others.

Both create a false demand picture for the supplier.

The cause of this phenomenon is behavioral but this behavioral process is resulting from bounded rationality and emotional reactions.

Furthermore, it is also caused by emotions. Examples show that a stressful environment can provoke emotional and physiological reactions such as anxiety, fear, and anger… It incites the consumer to increase his demand. Indeed, stressors occurring from shortage of poor supplier delivery performance cause hoarding and phantom ordering.

This caused a stress that may reduce people’s ability to understand and regulate the disequilibrium resulting in more phantom orders.

Consumers overreact to shortages mainly because of dramatic events (availability heuristic). Indeed, hoarding is fundamentally an emotional response to scarcity.

It appears also that phantom ordering occurs due to innate hoarding behavior. Consumers do not act rationally, as we can see in the Beer distribution game they attribute the cause of unexpected outcomes to external factors such as poor coordination of the game administration rather than their own decisions.

Finally, I think that hoarding and phantom ordering is caused by emotional and heuristic decision that motivate the consumer to not behave rationally, which lead in an amplification of demand.