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

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.

Bi-level pricing and inventory strategies for perishable products in a competitive supply chain

This paper aims to develop a new bi-level game model for joint pricing and inventory decisions in a competitive supply chain consisting of a dominant manufacturer, who produces single perishable product from deteriorating raw materials, and two follower retailers who face nonlinear price-dependent demand and operate under Cournot assumptions. Three levels of warehousing including raw material warehouse, final product warehouse, and retail warehouses with exponential deterioration rates are considered to explore the joint impact of deterioration rate and price elasticity on the equilibrium inventory decisions. A Stackelberg-Nash-Cournot model is developed to seek the equilibrium prices, quantities, and replenishment cycles and is solved through an exact methodology. A numerical example is presented to validate the proposed model and comprehensive sensitivity analyses are carried out to measure the impact of the model’s key parameters including the deterioration rate in the producer’s and the retailers’ warehouses, the retail and competitor price elasticity, and the market scale on the equilibrium.