On-Shelf Availability, Retail Performance, and External Audits: A Field Experiment Academic Article uri icon

abstract

  • A potential answer to retailer's shelf outofstocks (OOS), where the item is in the store but customers cannot find it, is to employ thirdparty service providers to execute audits and corrections. However, given the nontrivial cost of executing external audits, it is still necessary to assess whether external audits are capable of reducing shelfOOS, whether they can be performed in an economical way, and whether the benefits from the audits translate into higher sales. In an effort to address these questions, we partnered with a product manufacturer and a retail service provider and conducted a field experiment in a national retailer's store set. We used transactional data to detect abnormal operations and respond to possible shelfOOS by sending auditors to correct empty shelves and incorrect inventory records. At the conclusion of the experiment, we found that Stock Keeping Units in the treatment group were less likely to have shelfOOS and inventory record inaccuracies, and that our intervention had a positive effect on sales. Furthermore, we found that the external audit initiative is economically viable since these improvements required low auditing efforts after a transitional period, and in steady state the cost of running the program is a small fraction of the benefits it generates. We discuss the limitations of our study and the implications of our findings for researchers and practitioners.

published proceedings

  • PRODUCTION AND OPERATIONS MANAGEMENT

author list (cited authors)

  • Chuang, H., Oliva, R., & Liu, S.

complete list of authors

  • Chuang, Howard Hao-Chun||Oliva, Rogelio||Liu, Sheng