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Impacts of supplier hubris on inventory decisions and green manufacturing endeavors

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

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.

Suggested Citation

  • Lu, Xin & Shang, Jennifer & Wu, Shin-yi & Hegde, Gajanan G. & Vargas, Luis & Zhao, Daozhi, 2015. "Impacts of supplier hubris on inventory decisions and green manufacturing endeavors," European Journal of Operational Research, Elsevier, vol. 245(1), pages 121-132.
    • Handle: RePEc:eee:ejores:v:245:y:2015:i:1:p:121-132
    DOI: 10.1016/j.ejor.2015.02.051
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    3. Chenbo Zhu & Juntian Yue & Jing Chen, 2022. "Green Product Development and Order Strategies for Retailers," Sustainability, MDPI, vol. 14(15), pages 1-18, August.
    4. Katherinne Salas-Navarro & Paula Serrano-Pájaro & Holman Ospina-Mateus & Ronald Zamora-Musa, 2022. "Inventory Models in a Sustainable Supply Chain: A Bibliometric Analysis," Sustainability, MDPI, vol. 14(10), pages 1-21, May.
    5. Chen, Wenbo, 2018. "Retailer-driven carbon emission abatement with consumer environmental awareness and carbon tax: Revenue-sharing versus Cost-sharingAuthor-Name: Yang, Huixiao," Omega, Elsevier, vol. 78(C), pages 179-191.
    6. Xia, Liangjie & Li, Kang & Wang, Jun & Xia, Yi & Qin, Juanjuan, 2024. "Carbon emission reduction and precision marketing decisions of a platform supply chain," International Journal of Production Economics, Elsevier, vol. 268(C).
    7. Weihua Liu & Xinran Shen & Di Wang, 2020. "The impacts of dual overconfidence behavior and demand updating on the decisions of port service supply chain: a real case study from China," Annals of Operations Research, Springer, vol. 291(1), pages 565-604, August.
    8. Yan, Xiaoyu & Liu, Weihua & Tang, Ou & Hou, Jiahe, 2024. "When will an overconfident entrant in the two-sided market do more good than harm?," International Journal of Production Economics, Elsevier, vol. 267(C).
    9. Shoufeng Ji & Dan Zhao & Xiaoshuai Peng, 2018. "Joint Decisions on Emission Reduction and Inventory Replenishment with Overconfidence and Low-Carbon Preference," Sustainability, MDPI, vol. 10(4), pages 1-21, April.
    10. Hao, Zhongyuan & Li, Juan & Cai, Jinling, 2023. "Allocation of inventory responsibilities in overconfident supply chains," European Journal of Operational Research, Elsevier, vol. 305(1), pages 207-221.

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