Production and Operations Management

Does Forecast‐Accuracy‐Based Allocation Induce Customers to Share Truthful Order Forecasts?

Journal Article

Through a behavioral study, we investigate buyers’ strategic order forecasting behavior in a multi‐period setting under a forecast accuracy‐based allocation policy, 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.

Related Topics

Related Publications

Related Content

Site Footer

Address:

This website is provided by John Wiley & Sons Limited, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ (Company No: 00641132, VAT No: 376766987)

Published features on StatisticsViews.com are checked for statistical accuracy by a panel from the European Network for Business and Industrial Statistics (ENBIS)   to whom Wiley and StatisticsViews.com express their gratitude. This panel are: Ron Kenett, David Steinberg, Shirley Coleman, Irena Ograjenšek, Fabrizio Ruggeri, Rainer Göb, Philippe Castagliola, Xavier Tort-Martorell, Bart De Ketelaere, Antonio Pievatolo, Martina Vandebroek, Lance Mitchell, Gilbert Saporta, Helmut Waldl and Stelios Psarakis.