News

Top-tier publication in supply chain management

  • Faculté de Droit, d'Économie et de Finance (FDEF)
    06 septembre 2018
  • Catégorie
    Recherche
  • Thème
    Sciences économiques & gestion

A paper on strategic consumers and their impact on the inventory management of companies, co-authored by Prof. Benny Mantin, is set to appear in the top-tier journal Productions and Operations Management (POM).

With prices of products increasingly marked down for sales or special offers, consumers are adapting the timing of their purchases to get the best deal. They delay purchasing in expectation of a lower price but at the risk of facing stock-outs. How does this strategic consumer behaviour impact inventory managers’ stocking decisions?

In the absence of strategic waiting by customers, inventory managers balance the risk of over-ordering (leading to leftover stock) and ordering too little (leading to unmet demand). Yet, inventory managers exhibit a pull-to-centre bias. This suggests that the mean distribution of demand serves as an anchor resulting in the actual order being somewhere in between the optimal and the mean demand. For example, if the mean demand is 150 and the optimal order is 200, the actual order might be 175.

Strategic customers have, however, complicated matters. Prof. Mantin of the Luxembourg Centre for Logistics and Supply Chain Management (LCL) and his co-authors, Yang Zhang (Hong Kong University of Science and Technology) and Yaozhong Wu (National University of Singapore), have developed an analytical model to encompass the phenomenon of strategic consumers. They find, through lab experiments, that inventory managers are ordering less as the proportion of strategic customers increases. This indicates that inventory mangers seek to induce customers to buy early when prices are high. Ultimately, inventory managers exhibit a pull-below-centre bias when they drop their order even below the mean demand, leading to potentially detrimental results for the company.

The full findings are available in the paper “Inventory Decisions in the Presence of Strategic Customers: Theory and Behavioral Evidence”.

POM is one of the world-leading journals in the study of supply chain management and operations research. It is in the Financial Time top 50 list (FT50) and the UT Dallas top 19 Journals.

This publication further establishes the LCL as a prime research destination in this field in Europe.