A hidden anchor: The influence of service levels on demand forecasts

Behnam Fahimnia (Corresponding author), Meysam Arvan, Tarkan Tan, Enno Siemsen

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
54 Downloads (Pure)

Abstract

Demand planning is informed by demand forecasts, service level requirements, replenishment constraints, and revenue projections. “Demand forecasts” differ from “demand plans” in that forecasts only represent the distribution (or the most likely value) of product demand. Motivated by common forecasting practices in industry, our research examines whether forecasters recognize this difference between demand forecasts and demand plans. Based on a lab experiment informed by data from two large FMCG companies, we found that forecasters factor service levels into their demand forecasts, even when they are clearly instructed to predict the most likely demand and incentivized to minimize the forecast error. We establish that this result holds for students and practitioners alike, and show that this behavior is driven by the service level information, and not some other anchor. We use data from a recent industry survey to support the external validity of our key findings.
Original languageEnglish
Pages (from-to)856-871
Number of pages16
JournalJournal of Operations Management
Volume69
Issue number5
DOIs
Publication statusPublished - Jul 2023

Keywords

  • anchor
  • behavior
  • forecasting
  • judgment
  • sales and operations planning
  • service level

Fingerprint

Dive into the research topics of 'A hidden anchor: The influence of service levels on demand forecasts'. Together they form a unique fingerprint.

Cite this