On-Shelf Availability, Retail Performance, and External Audits: A Field Experiment

Production and Operations Management 25(5): 935-951, May 2016 . DOI: 10.1111/poms.12519

33 Pages Posted: 15 Feb 2018

See all articles by Howard Hao-Chun Chuang

Howard Hao-Chun Chuang

National Chengchi University - College of Commerce

Rogelio Oliva

Mays Business School, Texas A&M University

Sheng Liu

Sabre Inc.

Date Written: December 15, 2016

Abstract

A potential answer to retailer’s shelf out-of-stocks (OOS), where the item is in store but customers cannot find it, is to employ third-party service providers to execute audits and corrections. However, given the nontrivial cost of executing external audits, it is still necessary to assess whether external audits are capable of reducing shelf-OOS, whether they can be performed in an economical way, and whether the benefits from the audits translate into higher sales. In an effort to address these questions, we partnered with a product manufacturer and a retail service provider and conducted a field experiment in a national retailer’s store set. We used transactional data to detect abnormal operations and respond to possible shelf-OOS by sending auditors to correct empty shelves and incorrect inventory records. At the conclusion of the experiment, we found that SKUs in the treatment group were less likely to have shelf-OOS and inventory record inaccuracies, and that our intervention had a positive effect on sales. Furthermore, we found that the external audit initiative is economically viable since these improvements required low auditing efforts after a transitional period, and in steady state the cost of running the program is a small fraction of the benefits it generates. We discuss the limitations of our study and the implications of our findings for researchers and practitioners.

Keywords: retail operations, shelf out-of-stock, inventory record inaccuracy, service triad, field experiment

Suggested Citation

Chuang, Howard Hao-Chun and Oliva, Rogelio and Liu, Sheng, On-Shelf Availability, Retail Performance, and External Audits: A Field Experiment (December 15, 2016). Production and Operations Management 25(5): 935-951, May 2016 . DOI: 10.1111/poms.12519. Available at SSRN: https://ssrn.com/abstract=3116669

Howard Hao-Chun Chuang

National Chengchi University - College of Commerce ( email )

64 Sec 2 Zhinan Rd
Wens
Taipei, Taiwan 11605
Taiwan

Rogelio Oliva (Contact Author)

Mays Business School, Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4218
United States

Sheng Liu

Sabre Inc. ( email )

3150 Sabre Drive
Southlake, TX 76092
United States

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