Ordering Decisions in the Presence of Retail Promotions

Abstract

While behavioural ordering decisions pertaining to single-period settings have been widely examined in the literature, research on multi-period ordering decisions has been rare. This research contributes to this important field that is widely observed in the industry. The research primarily focuses on how ordering decisions are affected by the availability of retail promotion information. It also investigates the moderating effect of transit times (delivery lead times) on ordering decisions. The research is founded on a laboratory experiment containing one control group and two treatments. The participants were postgraduate students in logistics and supply chain management from Australia and Sri Lanka. This experiment uses an unknown demand distribution using real-world data. An Australian fast-moving consumer goods company provided access to sales data and demand forecasts. These figures are modified to ensure the confidentiality. A generalised linear model (GLM) was used to analyse the data gathered from the experiments. The findings highlight the importance of sharing selective information (presence of promotion) with decision makers in the presence of promotions while stressing that certain information (price discount of the promotion) might not be equally effective. Transit time is proven to have a moderating effect on ordering decisions. Findings show that researchers and practitioners need to be cautious on ordering decisions preceding promotional periods. The thesis outlines the importance of business leaders being aware of these nuances in managing information access to supply chain decision makers. For the first time, demand chasing behaviour in a multi-period setting is also observed and presented. The analysis finds that positive demand chasing occurs in the experiment for all but one tested condition. This suggests that the decision makers’ order quantities are positively correlated with the demand realisation of the most recent period.