Anchoring Effects in Inventory Control Decisions

Abstract

When supply chain managers are responsible for making forecasting decisions, those decisions may be influenced by a number of decision-making biases, one of which is anchoring. Anchoring is defined as "the disproportionate influence on decision makers to make judgments biased toward an initially present value." The impact of anchoring has been tested in a number of different fields, ranging from valuation of products to legal judgments. However, it has not been researched extensively in the area of supply chain management. This research aims to fill this gap by presenting an anchor to subjects who are making decisions in the field of inventory management to see what, if any, impact anchoring has in this context. The results from this research will inform managers whether they need to be careful about the presence of anchors in the information they provide to decision makers. Limiting the potential impact of the anchoring bias will lead to better inventory management. Effective inventory management has the power to greatly reduce costs by eliminating the risk of stockouts and holding excess inventory, both of which create additional expenses for companies.