On the causes of positive inventory discrepancies in retail stores

Abstract

Purpose Ensuring high on-shelf availability at low inventory costs remains an important challenge in retailing. Inaccurate inventory records, i.e. discrepancies between the stock records displayed in the inventory system and the stock quantity actually found in the retail store, have been identified as one of the most important drivers of retail stockouts in the past. The purpose of this work is to investigate the causes of positive inventory discrepancies in retailing, i.e. where there is more inventory on-hand than identified by the inventory system.

Design/methodology/approach Based on input from retailers, the authors develop a simulation model of a retail store that considers various error-prone processes and study in a full factorial test design how the different operational errors may drive inventory discrepancies, paying special attention to the sources of positive inventory record inaccuracies.

Findings This makes it possible to gain insights into the process parameters retailers need to adjust to avoid inventory records becoming inaccurate. In addition, the authors analyze how positive inventory discrepancies relate to stockouts to further our understanding of the role so-called phantom products may play in a retailing context.

Originality/value While negative inventory discrepancies (where the stock that is available in the store is less than what the system displays) and their sources (theft, shrinkage, etc.) have been discussed quite frequently in the literature, the causes of positive inventory discrepancies (where the available inventory exceeds the system inventory) have received much less attention.