Inventory Accuracy – does more accurate inventory grow sales, if so by how much and what investment is required to improve it?

Inventory accuracy2With billions invested in replenishment and forecasting systems, which are reliant on inventory records, it would seem almost a rude question to ask whether accuracy matters, yet with some published evidence suggesting that as much as 65% of inventory records are wrong, there seems to be little evidence of major change projects on inventory accuracy amongst group members.

This is perhaps even more surprising given the growing importance of online sales, where shoppers will want to know with certainty that the item is in stock before they order or travel to a store. One hypothesis could be that retailers already know that most inventory record errors do not negatively impact sales, as the inventory record error does not necessarily mean that the shelf is empty, and even if it is, there may be a presumption that the shopper will simply switch to buy another product.[1]

However, this may not be the case, with group discussions suggest that when inventory records are ‘trued up’ the store and/or high shrink categories, can see up to a 3-6% lift in sales. This is a similar uplift in sales being reported by apparel retailers that are attaching RFID tags to their products, where the main benefit of the system is to improve inventory record accuracy.

The research will be undertaken by academics with deep expertise in this field from three academic institutions, Cardiff Business School, EM EM-LYON Business School (France) and the Technische Universität Darmstadt (Germany). Their first research objective will be to establish, and turn into a credible and inarguable number, the impact on sales when inventory records go from being inaccurate to accurate. The aim is to also understand how the impact on sales varies by store format and by category. The second phase will be to establish the current best practices retailers are using to improve the accuracy of inventory records and identify the emerging techniques and technologies that could be used. The results from the first phase of the research will be shared with the members of the ECR Community Shrink and OSA Group in the Autumn of 2017.

For further information please contact the ECR Community Shrink & OSA Group

 

[1] Inventory Record Inaccuracy in Retail Supply Chains: Nicole De Horatius 2012 – Wiley

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