Investigating the effects of daily inventory record inaccuracy in multichannel retailing

Thomas Kull, Mark Barratt, Anníbal C. Sodero, Elliot Rabinovich

Research output: Contribution to journalArticle

15 Scopus citations

Abstract

Inventory record inaccuracy (IRI) challenges multichannel retailers in fulfilling both brick-and-mortar and direct channel demands from their distribution centers. The nature and damaging effects of IRI largely go unnoticed because retailers assume daily IRI remains stable over time within the replenishment cycle. While research shows that a high level of IRI is damaging, in reality the level of IRI can change every day. We posit that daily IRI variation increases the uncertainty in the system to negatively affect inventory and service levels. Our research uses data collected daily from a multichannel retailer to ground a discrete-event simulation experiment. Going beyond testing just the level of IRI, we evaluate daily IRI variation's impact on operating performance. What we find in our empirical data challenges extant assumptions regarding the characteristics of IRI. In addition, our simulation results reveal that daily IRI variation has a paradoxical effect: it increases inventory levels while also decreasing service levels. Moreover, we also reveal that brick-and-mortar and direct channels are impacted differently. Our findings show that assumptions and practices that ignore daily IRI variation need revising. For managers, we demonstrate how periods of multiday counting help assess their daily IRI variation and indicate what the causes may be.

Original languageEnglish (US)
Pages (from-to)189-208
Number of pages20
JournalJournal of Business Logistics
Volume34
Issue number3
DOIs
StatePublished - Sep 2013

Keywords

  • distribution center
  • inventory management
  • inventory record inaccuracy
  • multichannel retailing

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Management Science and Operations Research

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