Do you know your Biases in demand planning

𝐎𝐯𝐞𝐫𝐜𝐨𝐧𝐟𝐢𝐝𝐞𝐧𝐜𝐞.

Overconfidence is a set of biases rooted in an unjustified certainty in the legitimacy of one’s opinions.
In a study done, demand planners were more than 10% more likely to be overconfident that non-demand planners. This phenomenon is consistent with other research that finds for groups of people whose opinions are consistently sought, the prevalence of Overconfidence Bias tends to increase.

A notable subset of Overconfidence is the 𝐃𝐮𝐧𝐧𝐢𝐧𝐠-𝐊𝐫𝐮𝐠𝐞𝐫 𝐞𝐟𝐟𝐞𝐜𝐭, which shows that less experience correlates with greater overconfidence; and overconfidence can actually become lack of confidence as experience increases. Studies have found the degree of Overconfidence in Demand planning responders was about 20% higher in those who had less than one year experience, versus those with five or more years of experience.

𝐅𝐫𝐚𝐦𝐢𝐧𝐠 𝐄𝐟𝐟𝐞𝐜𝐭.

The Framing Effect is one of the strongest biases in decision-making because it is tied to multiple psychological drivers. It refers to the tendency of people to alter their opinions when presented with the same data but framed in a more or less appealing way. There are few biases more demanding of well-defined decision trees and a detailed choice architecture than the Framing Effect.
Considering that in most organizations, demand planning is charged not only with evaluating and integrating multiple sets of data, but of eliciting the data from sources certain to frame it in such a way as to further their personal interests, these results are especially eye-opening.

𝐆𝐚𝐦𝐛𝐥𝐞𝐫’𝐬 𝐅𝐚𝐥𝐥𝐚𝐜𝐲.

The Gambler’s Fallacy, occurs when an individual erroneously believes that a certain random event is less likely or more likely, given a previous event or a series of events. This line of thinking is incorrect because past events do not change the probability that certain events will occur in the future. This fallacy can be used as an insight into the strength of the individual’s knowledge of statistical probability concepts.

𝐏𝐞𝐫𝐬𝐢𝐬𝐭𝐞𝐧𝐭 𝐃𝐢𝐫𝐞𝐜𝐭𝐢𝐨𝐧𝐚𝐥 𝐁𝐢𝐚𝐬 (𝐎𝐩𝐭𝐢𝐦𝐢𝐬𝐦/𝐏𝐞𝐬𝐬𝐢𝐦𝐢𝐬𝐦).

Persistent Directional Bias indicates the tendency of a person to consistently interpret events through an unjustifiably positive or negative lens. It can be amplified by Present Bias, the Framing Effect and a number of other biases and heuristics. Of all biases present in planning, this set has the most pervasive effect, but is also the easiest to correct.

𝐂𝐥𝐮𝐬𝐭𝐞𝐫 𝐈𝐥𝐥𝐮𝐬𝐢𝐨𝐧 𝐚𝐧𝐝 𝐅𝐚𝐥𝐬𝐞 𝐒𝐞𝐚𝐬𝐨𝐧𝐚𝐥𝐢𝐭𝐲.

Cluster Illusion Bias is the tendency, especially among planners, to erroneously consider randomly occurring data distributions to be systemic or non-random.