Better safe than sorry: An empirical investigation of the role of purchaser experience

• The lead times of suppliers vary considerably, causing manufacturers to suffer from low service levels and also to accumulate material and product inventories. Although various inventory control and production planning models have been studied in the operations management literature, there is scant research on the behavioral aspects of purchasing decisions beyond the ordering quantity. Drawing on transaction-level purchasing data from a large European manufacturer, we investigate the purchasers' ordering behavior under variable lead times. We examine the learning of the purchasers from their experiences with the suppliers, in terms of both how many encounters they had with the suppliers and how the experiences went. We apply two-part regression models with fixed effects to estimate the effects of purchaser experience and past supplier performance. Our analysis reveals insights into the purchasers' learning process, indicating that they rely on their prior encounters with suppliers and change their ordering behavior as they gain experience. We show that the decision to add positive safety time is driven mainly by supplier performance. With experience, purchasers become more eager to use safety time as a buffering strategy, while simultaneously learning not to overreact to past supplier performance. Furthermore, purchasers give higher weights to the normalized lateness/tardiness of their most recent encounters than to earlier ones. Our results highlight the importance of understanding the behavioral aspects that impact purchasing operations, due to which employees might have objectives that are misaligned with the company goals. This finding also points to a need for further automation of ordering tasks as well as the incorporation of behavioral factors to decision support systems.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Nyckelord

behavioral operations

experience and learning

ordering behavior

variable lead times

safety time

regression analysis

Business Administration

företagsekonomi

Economics

nationalekonomi

Publikations- och innehållstyp

vet (ämneskategori)

ovr (ämneskategori)