Online inventory errors frustrate customers
Your son desperately wants that hot new video game, or your father can’t wait to get his hands on the latest and greatest new indoor painting tools. Before you race across town and fight traffic on a rainy night, you jump online to ensure that local retailers have the gifts in stock. Due diligence, right?
You’re in luck; items are in the store because . . . the Internet said so.
However, a trip to the store results in empty shelves. “Darn it! Someone beat me to it,” you assume.
The next day, you are back online and notice the same local store shows the items re-stocked with a free next-day store pickup option. You complete the online order and receive a confirmation e-mail. Everything looks set—until you receive another email a few hours later that reads, “Sorry, we don’t have the item in stock at the store. Instead we will ship your order from an out-of-state facility that will take two additional days.”
Don’t worry. You’re not alone.
Inventory glitches are common, Rafay Ishfaq, associate professor in Supply Chain Management at the Harbert College of Business, reports—and they are highly amplified during the holiday shopping season.
His co-authored papers, “Effectiveness of frequent inventory audits in retail stores: An empirical evaluation,” and “Empirical evaluation of IRI mitigation strategies in retail stores,” explore the phenomenon and propose some remedies. The articles were published in the International Journal of Logistics Management and Journal of Operational Research Society, respectively.
“The outcome of this research is a new inventory classification framework, one that incorporates error profiles of store inventory,” Ishfaq says. “We analyzed store sales, inventory and replenishment data from a national department store retailer to study the issue of inventory errors.”
The analysis shows that inventory errors are far more prevalent than one may think, and these information errors have a significant impact on retailers’ performance that lasts longer than previously known. Where do the glitches come from? Human errors, for one. Operational errors in the distribution process. Errors in shipping and receiving at the stores. Sometimes, items just don’t arrive in expected quantities.
“Using field data, we simulated the retail store environment to provide a proof of concept for our proposed inventory framework and show how managing inventory based on store error profiles would save retailers expensive resources and improve customer service.”
Ishfaq notes that many retail stores are taking up new roles of becoming tiny, local fulfillment centers, to help resolve the issue. Items that are stocked locally—and shown as “in stock” on the website—can be ordered online and shipped directly from the store, saving the retailer money in shipping expenses and briefly skewing the reported online inventory numbers.
“What makes this research really interesting is its connection to all the people shopping online. No one wants to wait for their orders just because store records were incorrect,” Ishfaq adds.