Does Forecast-Accuracy-Based Allocation Induce Customers to Share Truthful Order Forecasts?
Pelin Pekgün, Minseok Park, Pınar Keskinocak, Mani Janakiram
Production and Operations Management · 2019 · Volume 28 · Issue 10
Abstract
Through a behavioral study, we investigate buyers’ strategic order forecasting behavior in a multi-period setting under aforecast accuracy-based allocationpolicy, where the supplier allocates (proportionally) more inventory to the buyer with the better order forecast accuracy in case of scarce supply. We developed an interactive game that simulates a supply chain in which one supplier sells a key component to two buyers, who in turn sell to consumers. In each period, buyers share forecasts of future orders with their supplier. The participants in the game play the role of a buyer, while the supplier is automated. Our experimental findings suggest that rewarding forecast accuracy in allocating inventory can significantly improve the order forecast accuracy of the buyers and reduce their forecast inflation behavior. Interestingly, even without communication of the policy, buyers learn over time that more accurate forecasts lead to better service from their supplier and improve their order forecast accuracy.
Keywords
soft orders, forecast sharing, forecast inflation, capacity allocation, behavioral experiments
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