Multi-period ordering decisions in the presence of retail promotions

Abstract

This paper investigates the impact of retail promotions on inventory decisions in a multi-period ordering setting. A laboratory experiment was designed to examine how awareness of promotional information could improve ordering decisions and reduce supply chain costs. Drawing on data from 140 participants in Australia and Sri Lanka, our study reveals several key findings and practical insights. (i) Awareness of upcoming promotions significantly improves ordering decisions by minimizing ordering costs while maintaining service levels. (ii) Access to detailed promotional information (e.g., the extent of price discounts) does not noticeably improve these decisions. (iii) Transit times serve as a moderating factor; longer transit times can lead to supply line underweighting, thereby escalating ordering costs. (iv) A lack of promotional awareness results in adverse behaviors, including bracing and demand chasing. These findings and practical insights underscore the critical role of timely and effective communication of promotional information in improving multi-period ordering decisions.