Psychological determinants of

inventory management performance

Dr. Andreas Größler

Nijmegen School of Management

Business Administration – Methodology

E-mail: a.groessler@fm.ru.nl

Inventory management issues are commonplace in daily life

and in business.

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There are three bodies of literature dealing with the issue of

inventory management failures:

1. Normative approaches, operational research (for reviews cf., Williams and

Tokar, 2008; Gino and Pisano, 2008)

2. Psychological research on complex problem solving (e.g., Dörner, 1980;

Sternberg and Frensch, 1991; Brehmer, 1992; Brehmer and Dörner, 1993;

Ackerman and Kanfer, 1993; Dörner et al., 1994; Frensch and Funke,

1995; Dörner, 1996; Wittmann and Hattrup, 2004)

3. System dynamics research on stock management behaviour (e.g.,

Sterman,1989; Booth Sweeny and Sterman, 2000; Ossimitz, 2002;

Sterman and Booth Sweeny, 2002; Croson and Donohue, 2003, 2006;

Pala and Vennix, 2005; Cronin et al., 2009; Sterman, 2010)

In operational research, optimal solutions to inventory

management problems are sought.

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Inventoryops.com

In psychology, complex problem solving deals with the

behaviour of people in simulated situations.

Dörner

In system dynamics, experiments show the difficulty of

people to understand/to control stocks and flows.

The research gap lies in the intersection of the three

literatures.

OR – domain

CPS – person factors

SD – experimental

design

Why is stock management relevant? A more substantial

example…

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Ackerman‘s (1996) PPIK theory has been tested against

performance in an inventory management task.

Pugepo: Inventory management for a pump producer as

experimental task.

Experimental design and participants:

• N = 72 participants, 3rd year bachelor students from German business

school; elective course “Operations Management”, autumn 2010

• Tests: - Intelligence: BIS at start of study

- Knowledge: average of marks for related courses from studies

- Personality: NEO FFI at start of experiment

- Interests: AIST-R at start of experiment

- Performance: PUGEPO simulation as last part of experiment, total accumulated costs

as measure

• Financial incentive: max. 9.55 €, average achieved 4.55 €

About 50% of participants fail to beat simple benchmark

strategies.

replicating incoming orders

keep initial orders

Intelligence and knowledge have a clear effect on

performance; entrepreneurial spirit has an adverse effect. A B C D E

Constant -.005 .028 .004 .001 .005

(.111) (.117) (.112) (.108) (.106)

BIS-AI-S -.363*** -.326*** -.383*** -.335***

(.111) .109 (.118) (.110)

WIWI -.286*** -.234** -.161 -.244**

(.122) (.118) (.131) (.115)

AIST-R practical and technical -.084

(.142)

AIST-R intellectual and investigative -.170

(.140)

AIST-R artistic and linguistic .062

(.137)

AIST-R social -.052

(.137)

AIST-R entrepreneurial .313** .219**

(.153) (.107)

AIST-R organizational and administrational -.016

(.123)

NEO-FFI neuroticism -.105

(.132)

NEO-FFI extraversion -.167

(.149)

NEO-FFI openness to experience .159

(.137)

NEO-FFI agreeableness .200

(.143)

NEO-FFI conscientiousness -.057

(.126)

R-squared .132 .082 .186 .330 .233

Adjusted R-squared .120 .069 .162 .180 .199

No. observations 72 72 72 72 72

Intelligence and knowledge highly relevant; little evidence

for interest and personality factors.

• One significant interest dimension: entrepreneurial spirit (negative!)

• Variance explained is limited

• Number of participants needs to be increased

• Other forms of statistical analysis (e.g. structural equation modelling) would

allow investigating inter-construct relationships

• Influence of task complexity/ demand uncertainty on performance?