A study of heuristics and cognitive biases affecting the decision-making of inventory management for drugstores

Heuristics have a significant impact on many entrepreneurs' decisions since they typically make decisions under uncertain conditions, time constraints, and little information. Inventory management is one task that necessitates several judgments. Overstock or inadequate supply to meet demand can result from an imbalance in selling and ordering. In inventory management, heuristic decisions are unavoidable, which can lead to cognitive biases in decision-making. The purpose of this study is to investigate and identify eight heuristics and cognitive biases that may occur in the decision-making process of a drugstore entrepreneur regarding inventory management. Overconfidence bias, planning fallacy, representativeness heuristic, regret and counterfactual thinking, escalation of commitment, illusion of control, anchoring heuristic, and the affect heuristic are all typical cognitive biases in entrepreneurial decision-making. The experiments were carried out through face-to-face interviews with 60 participants who have been running the firm for more than a year. The findings revealed that entrepreneurs occasionally make decisions based on heuristics and cognitive biases. The affect heuristic, the planning fallacy, and overconfidence all emerge more frequently than others. Because entrepreneurs have greater knowledge and experience, regret and counterfactual reasoning, as well as the escalation of commitment, rarely influence their inventory management decision-making. These findings show that some heuristics may be addressed as knowledge and experience grow. However, it is not required to avoid them because they may occasionally be advantageous in certain conditions, such as responding to client needs on time even if the aim exceeds the plans.