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Effect of Supply Chain Uncertainties on Inventory and Fulfillment Decision Making: An Empirical Investigation

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2019, Doctor of Philosophy, Ohio State University, Business Administration.
Strategic supply chain planning under uncertainty has obtained significant attention in both practice and academia over the last few years. While there have been a number of analytical studies, empirical research on the effect of uncertainty in different dimensions on individual decision-making is rather limited. In three essays, we model how human decision-making gets affected by various aspects of uncertainty on both upstream and downstream level. Numerous studies have separately examined either the impact of demand or supply uncertainty on ordering decisions, although little empirical work has focused on distinguishing these effects when both are present. Accordingly, in our first essay we focus on settings in which both uncertainties exist simultaneously, with the intent of shedding light on these possible distinctions. We leverage a controlled laboratory experiment in a modified newsvendor setting with two suppliers of varying levels of dependability and cost. While the impact of demand uncertainty appears consistent with prior results, the impact of supply uncertainty is more nuanced. Decision‐makers are drawn to the reliable supplier in the high‐supply‐uncertainty case, subsequently simplifying order decision making and decreasing deviation from optimality. Supply uncertainty also appears to impose limits on the extent to which experiential learning benefits optimal ordering choice. In the second essay, we study the effect of a service-reward mechanism – an endogenous relationship between prior service level and current demand – on managerial decision-making in both single-period newsvendor and a multi-period serial supply chain activity. We conduct two controlled laboratory experiments using two fundamental supply chain models: the newsvendor and the beer game. Our empirical results suggest that the service-reward mechanism significantly and systematically elevates order levels and order variability in a manner that increases departure from optimal ordering as well as the variation in that departure. Moreover, a service-reward mechanism impacts the standard deviation of absolute order quantities in the serial supply chain simulation. Our findings help researchers and practitioners better understand potential drawbacks of service-reward mechanisms or, similarly, temper the expansion of procurement function involvement in activities such as demand management. They may also help identify managers that are most suitable for purchasing roles that may explicitly confront service-reward mechanisms. In the third essay, we collaborate with a large furniture retailer to study how the end-customers’ request for split delivery of their multi-item orders is affected by the fulfillment uncertainty. We implement a balanced random forest model to emulate the split order decision-making with a manageable misclassification error rate for predicting no splits for the orders that should have been split. We develop a simplified rule for the retailer that could identify the supply uncertainty associated with a multi-item order and predict split or no-split at the time of checkout to deter upstream uncertainty from trickling down to the downstream fulfillment and potentially improve the fulfillment experience for the customers. We hope, this dissertation would expand our understanding of individual decision-making process under the presence of different dimensions of supply chain uncertainty.
Elliot Bendoly (Committee Chair)
Ken Boyer (Committee Co-Chair)
Nathan Craig (Committee Member)
159 p.

Recommended Citations

Citations

  • Paul, S. (2019). Effect of Supply Chain Uncertainties on Inventory and Fulfillment Decision Making: An Empirical Investigation [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1563510590703363

    APA Style (7th edition)

  • Paul, Somak. Effect of Supply Chain Uncertainties on Inventory and Fulfillment Decision Making: An Empirical Investigation. 2019. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1563510590703363.

    MLA Style (8th edition)

  • Paul, Somak. "Effect of Supply Chain Uncertainties on Inventory and Fulfillment Decision Making: An Empirical Investigation." Doctoral dissertation, Ohio State University, 2019. http://rave.ohiolink.edu/etdc/view?acc_num=osu1563510590703363

    Chicago Manual of Style (17th edition)