Inventory Record Inaccuracy: Causes and Labor Effects

Journal of Operations Management. Vol. 39-40: 63-78. Doi: 10.1016/j.jom.2015.07.006

38 Pages Posted: 16 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

Date Written: 2015

Abstract

Inventory record inaccuracy (IRI) is a pervasive problem in retailing and causes non-trivial profit loss. In response to retailers’ interest in identifying antecedents and consequences of IRI, we present a study that comprises multiple modeling initiatives. We first develop a dynamic simulation model to compare and contrast impacts of different operational errors in a continuous (Q, R) inventory system through a full-factorial experimental design. While backroom and shelf shrinkage are found to be predominant drivers of IRI, the other three errors related to recording and shelving have negligible impacts on IRI. Next, we empirically assess the relationships between labor availability and IRI using longitudinal data from five stores in a global retail chain. After deriving a robust measure of IRI through Bayesian computation and estimating panel data models, we find strong evidence that full-time labor reduces IRI whereas part-time labor fails to alleviate it. Further, we articulate the reinforcing relationships between labor and IRI by formally assessing the gain of the feedback loop based on our empirical findings and analyzing immediate, intermediate, and long-term impacts of IRI on labor availability. The feedback modeling effort not only integrates findings from simulation and econometric analysis but also structurally explores the impacts of current practices. We conclude by discussing implications of our findings for practitioners and researchers.

Keywords: Retail operations; store execution; inventory record inaccuracy, system dynamics, design of experiments, Bayesian inference, econometrics

Suggested Citation

Chuang, Howard Hao-Chun and Oliva, Rogelio, Inventory Record Inaccuracy: Causes and Labor Effects (2015). Journal of Operations Management. Vol. 39-40: 63-78. Doi: 10.1016/j.jom.2015.07.006. Available at SSRN: https://ssrn.com/abstract=3118305

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

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