Decision Making in Hierarchical Production Planning: Goals, Heuristics and Biases

Abstract

The present research applies an experiment to simulate a hierarchical production planning environment to determinate the effect of goal setting on the production scheduler’s performance, related to lot sizing costs. The same instrument is also useful to detect some heuristics and biases influencing on production scheduler’s decision making. The observation of reiterative behavioral patterns and the use of statistical parametric methods show that: (a) goal setting reduces production scheduler’s cost dispersion, making the results more predictable, but it doesn’t have influence on performance; (b) representativeness and availability heuristics are the most applied by production schedulers; and (c) the more frequent biases affecting production scheduler’s decision making are related to subjective probability setting, loss aversion, and myopia. The methodology is adaptable to other production environments and organizational functional areas.