Inventory inaccuracy in retailing: Does it matter?
The Institute of Production and Supply Chain Management at TU Darmstadt (Prof. Dr. Christoph Glock), together with Cardiff Business School (Prof. Dr. Aris Syntetos), EMLyon Business School (Prof. Dr. Yacine Rekik), and the industry association Efficient Consumer Response (ECR), completed a collaborative project that investigated the impact of inaccurate inventory records on retail sales.
The project addressed the problem that inventory information recorded in inventory control systems in the retail sector is often incorrect in practice.
Previous studies by the project partners had shown that in the retail sector, discrepancies between the inventory recorded in the system and the actual available inventory often occur for more than 50% of the stock keeping units. If a larger quantity of items is recorded in the inventory management system than is actually available in the store, orders that are placed too late can lead to stockouts and a reduction in sales, while in the opposite case, unnecessarily high (and expensive) inventory levels have to be maintained.
Against this background, the project investigated how a correction of inventory data affects sales in the retail sector. For this purpose, inventory and sales data was collected from a large number of stores of eight international retailers and statistically analysed. At half of the participating stores (the test group), a stock audit was conducted halfway through the observation period to correct errors in the inventory data available in the system, while at the second half (the control group), no stock audit was made. A comparison of the two groups using statistical methods showed that discrepancies between the system inventory and the inventory available in the store occurred in approx. 60% of the stock keeping units analysed. Positive and negative deviations occurred with approximately the same frequency and to a similar extent as negative stock deviations. A comparison of the test group with the control group showed that the additional stock audit – and therefore the correction of the inventory data – led to an increase in sales of between 4% and 8%. The results of the study enable companies to estimate the effects of stock audits on their sales and also allow them to isolate stock keeping units for which data correction promises the greatest possible increase in sales.
A detailed report on this research project can be downloaded free of charge from the following link:
https://www.ecrloss.com/research/grow-sales-by-improving-inventory-records?from=/research/4
