Investigating the Effects of Daily Inventory Record Inaccuracy in Multichannel Retailing

Thomas J. Kull, Arizona State University
Mark Barratt, Marquette University
Anníbal C. Sodero*, University of Arkansas
Elliot Rabinovich, Arizona State University

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. In reality, levels of IRI can change every day. This research uses data collected daily from a multichannel retailer to ground a discrete-event simulation that tests how daily IRI variation impacts operational performance. 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 decreasing service levels.  We also reveal important aspects of this problem –– that channels are impacted differently and that inventory policies can exacerbate the problem. Our findings show that assumptions and practices that ignore daily IRI variation need revising. For managers, we demonstrate how periods of multi-day counting help assess their daily IRI variation and indicate what the causes may be.

 

Kull, T.; Barratt, M.; Sodero, A.*; Rabinovich, E. (2013) “Investigating the Effects of Daily Inventory Record Inaccuracy in Multichannel Retailing.” Journal of Business Logistics 34, No. 3, 189-208.