Inventory Management with Purchase Order Errors and Rework
Harvard Business School
University of Chicago - Booth School of Business
Northwestern University - Department of Industrial Engineering and Management Sciences
August 12, 2014
Chicago Booth Research Paper No. 12-58
Shipments received by retail distribution centers may contain errors that retailers can correct through rework. A ticket error, for example, occurs when the tickets attached to some items within a purchase order (PO) display incorrect information, such as selling price, and can be amended by affixing corrected tickets. Ticket errors and other PO fulfillment errors, discussed herein, are costly and different from traditional random yields. This paper describes the prevalence of PO errors at a large retail chain and studies the cost of PO errors to a standard inventory system. In so doing, this research provides guidance to retailers seeking to collaborate with vendors to reduce errors, set appropriate chargebacks to incentivize vendors, or modify their inventory policy to account for PO errors.
Number of Pages in PDF File: 35
Keywords: retail, inventory accuracy, vendor complianceworking papers series
Date posted: December 14, 2011 ; Last revised: August 15, 2014
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