Will that holiday gift be in stock? Auburn University professor says inventory errors are far more prevalent than one may think

Your child 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. It’s the holiday shopping season so why not find the perfect gift for your loved ones?

Before you race across town and fight traffic on a cold night, you jump online to ensure that local retailers have the gifts in stock. You’re in luck! Items are in the store because … the Internet said so.

However, a trip to the stores result in … empty shelves. You say, “Darn it! Someone beat me to it.”

The next day, you are back online and noticed the same local store show the items restocked with a free next-day store pickup option. You complete the online order and receive a confirmation e-mail. Everything looks set—only to 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 in the Auburn University’s Harbert College of Business, reports—and they become 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 said. “We analyzed store sales, inventory and replenishment data from a national department-store retailer to study the issue of inventory errors.”

The analysis show that inventory errors are far more prevalent that 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 noted that many retail stores are taking up a new role of becoming tiny, local fulfillment centers. 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, especially this holiday season. No one wants to wait for their orders just because store records were incorrect,” Ishfaq added.

(Written by Joe McAdory)