Service-level anchoring in demand forecasting: The moderating impact of retail promotions and product perishability

Abstract

The development of demand plans involves the integration of demand forecasts, service-level prerequisites, replenishment constraints, and revenue projections. However, empirical evidence has brought to light that forecasters often fail to distinguish between demand forecasts and demand plans. More specifically, forecasters frequently incorporate service-level requirements into their demand forecasts, even when explicitly instructed not to do so. This study endeavors to investigate the potential moderating impacts of product perishability and the presence of sales promotions on this phenomenon. Our findings reveal that sales promotions can meaningfully moderate the influence of service levels, since individuals tend to exhibit an elevated propensity for overforecasting during promotional periods when service levels are high. Surprisingly, no compelling evidence is found for the moderating effect of product perishability.