Crying Wolf and a Knowing Wink: A Behavioral Study of Order Inflation and Discounting in Supply Chains

• DOI: 10.1111/poms.13595
• Publication Date: 2021-10-09T11:33:22Z
• Authors: Tarikere T. Niranjan; Narendra K. Ghosalya; Srinagesh Gavirneni
• Keywords: 0211 other engineering and technologies; 02 engineering and technology

Two field case studies uncover information discounting in supply chains, which manifests the form of schedule padding and order inflation. Buyers often exaggerate urgency quantity their needs (“crying wolf”). However, both buyers suppliers eliminate old, inflated orders from behavioral ordering/supply system implicitly (“knowing wink”) even though they exist hyper‐rational ordering represented by ERP system. This behavior results (and from) low credibility exchanged between subsequent actions, settles a suboptimal equilibrium. Eye tracking experiments based on these unpack psychophysiological mechanisms behind this behavior, specifically, how decision makers consider past UnFilled Orders under different experimental conditions. We find that merely improving supplier does not help: reduces only when we sensitize buyer to improvement behavior. comes with no financial performance improvements; improves further educating optimal target inventory.