Impacts of supplier hubris on inventory decisions and green manufacturing endeavors

Xin Lu, Jennifer Shang, Shin-yi WU, Gajanan G. Hegde, Luis Vargas, Daozhi Zhao

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

The paper studies the impact of a green supplier's overconfidence on inventory decisions in a supply chain consisting of a supplier facing effort-dependent stochastic demand and a rational retailer. The overconfident supplier may overestimate the product demand due to carbon-reduction green efforts or underestimate the variability of the stochastic demand. We characterize these two kinds of overconfidence as ability-based and precision-based overconfidence, for which we develop optimal models for three supply chain systems: integrated, vendor managed inventory, and retailer managed inventory. Extensive comparative studies are conducted to highlight the impacts of supplier's overconfidence on the inventory decisions and on different green-supply chain performance measures. We find that, under certain conditions, supplier's overconfidence prompts the supplier to exert more efforts on green manufacturing, and enhances the profits of the retailer and of the entire supply chain. Managerial insights are provided for various scenarios and propositions.

Original languageEnglish (US)
Pages (from-to)121-132
Number of pages12
JournalEuropean Journal of Operational Research
Volume245
Issue number1
DOIs
StatePublished - Aug 16 2015

Keywords

  • Effort-dependent demand
  • Green manufacturing efforts
  • Supplier's overconfidence
  • Supply chain management
  • Vendor or retailer managed inventory

ASJC Scopus subject areas

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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