Supply Chain Inventory Planning
Description
My work studies management decision-making in demand and supply planning contexts with a focus on forecasting and inventory planning decisions. I examine these decision-making processes from both a supply chain (i.e. across firm) and an organizational (within firm) perspective. My work diverges from the classic “rational agent” perspective of most of the extant supply chain / operations management (OM) literature. My research includes observations of managerial behavior and the cognitive biases that we so often see in practice and which are reported in the psychology and organizational behavior (OB) literatures.
My research portfolio can be grouped into two streams of work. The first stream directly studies the errors managers make in inventory decisions. By errors, I mean manager’s systematic deviations from theoretically best possible decisions. I focus on systematic and behaviorally-based errors, e.g., errors resulting from cognitive biases identified in the forecasting literature. The implicit finding in this body of work is that these systematic errors result in identifiable mechanisms that impede performance. The main goal of my research is to better understand these mechanisms within the context of inventory management so as to guide recommendations for performance improvement.
My second line of inquiry examines forecasting and planning in a cross-functional setting and layers organizational dynamics on top of individual and group behavioral assumptions about decision-making. Poor reconciliation of inter-functional conflicts has the potential to cause huge demand/supply mismatches and their attendant costs. The extant literature tends to focus on forecasting methodologies or the impact of incentives. Instead, my work focuses on the forecasting and planning processes directly and situates them within what we refer to as coordination systems. Consistent with my approach in the first stream of work, I focus on how behavioral differences across functions, e.g., differences in beliefs, priorities and cognitive biases, need to be managed by forecasting and planning processes and systems.
In the last twenty years, supply chain management research has expanded the scope of classic inventory theory by incorporating more realistic considerations such as the effect of incentives, information asymmetries, decentralized ownership and competition. Primarily using analytical modeling methodology, these more realistic models have provided valuable insights on how to improve the performance of supply chains through coordination, information sharing and effective competition. However, the resulting theory typically still assumes, within the planning context, that managers act as completely rational agents. The focus of this extant theory, then, is on a narrow set of planning problem definitions and, thus, a narrow set of normative prescriptions. The behavioral perspective, at the heart of my research, therefore represents a significant departure from the traditional academic literature in operations and supply chain management. Three factors have motivated the departure of my research from the traditional supply chain literature:
1) the inventory planning process, both within organizations and across supply chains is beset with a number of problems, and, at best, that process, in most firms and across most supply chains, is ineffective;
2) there exists a disconnect between the inventory and forecasting literature and the actual approaches of practitioners; and
3) our academic understanding of actual organizational planning processes is rudimentary.
I attribute this disconnect and our rudimentary understanding of organizational planning processes to the lack of more realistic behavioral assumptions in current inventory planning research. This lack of realism blunts the normative impact of these models.
In contrast, my work centers on the belief that due to the complexity of managing supply chains, decisions also depend on the interaction between significant behavioral limitations/strengths of the decision-makers and organizational decision processes (March and Simon 1993). This belief has been a research interest of mine since my dissertation work, and at HBS I have been able to build on this interest and deepen it with field work. Thus, for a given planning context, I believe, a more realistic view of behavior is warranted. In contrast to extant theory, this more realistic view should study a wider range of behavior in response to a particular problem definition. My work is thus informed by field-based examinations of how actual planning gets done.
The overall focus on decision-making processes of my research efforts is by no means new to the study of business administration. March and Simon (1993) describe their seminal work as being unified by decision-making and the flow of information that instructs, informs and supports decision-making processes within organizations. Why then should a decision-making perspective that has characterized much of the work in organizational behavior be considered a contribution within supply chain management? Similar questions have been asked about a perspective of incentives on supply chain management. The response is effectively the same: supply-chain decision-making processes will depend intimately on the dynamics that are context-specific and therefore require an explicit study of inventory-planning decision-making.
March, J. and H. Simon (1993). Organizations. Cambridge, MA, Blackwell