A literature review on the anomalies observed in the newsvendor ordering behaviour

Gajanand

2021

BIJ

Self Cite

PurposeThe paper provides a comprehensive overview of the biases in inventory decisions, under the umbrella of behavioural operations, considering research findings that used experimental methods. Research in this field has gained traction but, to the best of our knowledge, review articles that summarize these research findings are scarce. Hence, there is a need to synthesize the anomalies and biases reported in inventory decision-making literature to gain a more integrated understanding.Design/methodology/approachThis study reviews themes relevant to inventory and behavioural operations management from the articles published in recognized top-tier journals during the period between 2000 and 2020 with an aim to build a classification framework. Further, using a systematic review procedure, the relevant research studies are divided into sub-sections and appropriate search strategies are adopted to pleat more information on inventory ordering biases.FindingsThis study presents a classification framework by highlighting the factors influencing the biases in inventory decisions and describes the effects of utility preferences on the decision-making behaviour. It highlights the inventory ordering pattern under unconventional settings and also for different supply chain settings. This systematic review helps in identifying the research gap and in giving directions for future researchers.Originality/valueThe study presents a systematic review and detailed analysis of the research in inventory decision making through a behavioural lens. The study shows a clear direction of progress over the years, and implies new directions for looking beyond placing orders and for moving towards a more integrated approach while making supply chain decisions. It will be useful for researchers and practitioners working on newsvendor decisions, supply chain contracts, behavioural economics, behavioural operations management, bounded rationality theory and experimental economics.

Section: Theoretical Frameworkmentioning

confidence: 99%

Inventory decision-making biases: a review and suggestions for future research

Gajanand

2021

BIJ

Self Cite

“…Perhaps, the empirical studies to test many established theories of OM are clearly lacking. To be more specific, topics such as quantifying the level of customer's bounded rationality, to find how this level is different across customers, association between the complexity of an OM setting and the level of bounded rationality, impact of demographic and sociological factors on the level of bounded rationality are yet to be explored (Ren and Huang, 2018; Yamini, 2019).…”

Section: Cognitive Heuristics or Biases That Explain The Newsvendor Decision-making Behaviormentioning

confidence: 99%

Behavioral perspective of newsvendor ordering decisions: review, analysis and insights

2020

Self Cite

PurposeThe traditional newsvendor model has focused on deriving the optimal order quantity that minimises the balance between stocking too much or too less number of products. However, the managers make inventory decisions based on intuitions and shortcuts, which may involve human errors and biases. The effect of cognitive biases and heuristics influencing the inventory ordering decisions in newsvendor settings is highlighted. The advancement of research associated to the newsvendor biases is reviewed to appreciate the behavioral aspects of the minds underlying this process.Design/methodology/approachThe use of experimental and non-experimental methods to investigate the ordering behaviour of newsvendors is described and we present a framework of the existing literature and highlight the research gaps to point to future research possibilities and priorities.FindingsThe proposed framework gives a systematic approach to confirm the existence of a substantial scope of research opportunities and points to specific areas for further research. It synthesizes the existing results of behavioral newsvendor research and will act as a key reference paper. In addition, it will help the practitioners and software tool vendors to comprehend the behavioral perspective of newsvendor preferences and design strategies to mitigate this effect. The insights will be helpful for academicians, researchers and practitioners working in the areas of experimental economics, behavioral economics, behavioral operations, bounded rationality theory, newsvendor modelling and supply chain contracts.Originality/valueA summary of literature in this evolving area of research is very scarce. Considering the impact of behavioral economics on managerial decisions in the contemporary world, it is highly important to have an educational summary which can act as a tool for the practitioners and researchers in the area of behavioral operations management.

“…There are a significant number of research studies that focuses on the profit implications of supply chain members by offering a returns policy (Guo et al, 2017). However, the role of psychological implications to influence the purchasing pattern of a customer is scarce in the supply chain literature (Yamini, 2020(Yamini, , 2021. This study focuses on understanding the impact of pricing and ordering decisions of retailers, when the manufacturers offer a flexible returns policy for the lenient returns policy announced by the retailers to the customers.…”

mentioning

confidence: 99%

Effect of manufacturer's flexible returns policy in a duopolistic competition

Gajanand

2022

BIJ

Self Cite

PurposeFlexible return policies are offered by the manufacturers to encourage the retailers announcing a lenient returns scheme to their customers.Design/methodology/approachThis study considers the distribution of durable products in a supply chain where the demand is sensitive to sales effort and retail price. Using a game theoretic framework, the paper presents an assessment of the strategic effect of flexible returns policy announced by the manufacturer under retail competition and highlights its implications on profitability.FindingsComparative analysis of monopolistic and duopolistic competition provides a better understanding about the repercussions and related facts on offering a flexible returns policy in these environments. It is profitable for the manufacturer to offer a flexible returns policy when there is retail competition than under monopolistic condition.Practical implicationsPractitioners view returns policy offered as an insurance given to the buyers and they infer it to be a better mechanism for doing business. Lenient returns policy promotes the sales by increasing the trust on the retailer and boosts up the perception of quality about the product by lowering the perceived risk for customers.Originality/valueEffective product return strategies such as being lenient in terms of time, money, effort, scope and exchange can result in increased revenues, lower cost and improved profitability to the manufacturer and retailer, at the same time offering an enhanced level of customer service.