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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 53, No. 3, pp.573-593
ISSN: 1226-1874 (Print)
Print publication date 30 Jun 2024
Received 01 Feb 2024 Revised 17 Mar 2024 Accepted 18 Mar 2024
DOI: https://doi.org/10.17287/kmr.2024.53.3.573

Supply-chain Inventory Management with Behavioral Consideration

Jin Kyung Kwak
(First Author) Ewha Womans University jkkwak@ewha.ac.kr
공급망 재고 관리에 대한 행동학적 연구
곽진경
(주저자) 이화여자대학교


Copyright 2024 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We develop inventory control strategies for a supplier who is selling a product to a group of newsvendors. Recent research in newsvendor experiments using human subjects revealed significant behavioral tendencies in the decision making processes for inventory management. If the supplier would incorporate these behavioral tendencies while managing her inventories, her costs would be significantly reduced. Using data from experiments, we estimate the possible reductions in supplier costs and determine the factors that significantly impact it. We observe a significant improvement in the supplier’s inventory decision if she estimates the demand distribution with a model that captures the anchoring tendencies instead of assuming aggregate randomness. As the model selection relies much on the data, it is an important task to determine whether the retailers are mean-anchoring, demand-chasing, both, or neither. In addition, we observe that the information about retailers’ behaviors is more beneficial for the supplier when the end-customer demands are more variable. It is certain that more precise information on the data will lead to a better inventory decision for suppliers. The information includes the retailers’ behavioral tendencies, individual-specific order behaviors, and the variability of end-customer demands.

Keywords:

supply chain management, inventory control, behavioral operations

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∙ The author Jin Kyung Kwak is an associate professor at Ewha School of Business. She graduated from Seoul National University in Korea and received PhD in Operations Management from Cornell University in the United States. Her major research areas are supply-chain inventory management, behavioral operations, and service operations.