Structural Estimation of the Effect of Out-of-Stocks

We develop a structural demand model that endogenously captures the effect of out-of-stocks on customer choice by simulating a time-varying set of available alternatives. Our estimation method uses store-level data on sales and partial information on product availability. Our model allows for flexible substitution patterns, which are based on utility maximization principles and can accommodate categorical and continuous product characteristics. The methodology can be applied to data from multiple markets and in categories with a relatively large number of alternatives, slow-moving products, and frequent out-of-stocks (unlike many existing approaches). In addition, we illustrate how the model can be used to assist the decisions of a store manager in two ways. First, we show how to quantify the lost sales induced by out-of-stock products. Second, we provide insights on the financial consequences of out-of-stocks and suggest price promotion policies that can be used to help mitigate their negative economic impact, which run counter to simple commonly used heuristics

Integration of Online and Offline Channels in Retail: The Impact of Sharing Reliable Inventory Availability Information

Using a proprietary data set, we analyze the impact of the implementation of a “buy-online, pick-up-in-store” (BOPS) project. The implementation of this project is associated with a reduction in online sales and an increase in store sales and traffic. These results can be explained by two simultaneous phenomena: (1) additional store sales from customers who use the BOPS functionality and buy additional products in the stores (cross-selling effect) and (2) the shift of some customers from the online to the brick-and-mortar channel and the conversion of noncustomers into store customers (channel-shift effect). We explain these channel-shift patterns as an increase in “research online, purchase offline” behavior enabled by BOPS implementation, and we validate this explanation with evidence from the change of cart abandonment and conversion rates of the brick-and-mortar and online channels. We interpret these results in light of recent operations management literature that analyzes the impact of sharing inventory availability information. Our analysis illustrates the limitations of drawing conclusions about complex interventions using single-channel data

HOWCAN MULTI- CHANNEL RETAILING FURTHER EXPAND THEIR PRODUCT RANGE WHILST SUSTAINING CUSTOMER EXPERIENCE AND SATISFACTION FOR BOOTS.COM? A Risk management perspective

Albert Einstein (1923) once said 'You believe in a God who plays dice, and I am in complete law and order in a world which objectively exists. God does not play with dice in nature, the outcomes of most of the risks we create; depend on the decisions of other human being especially in business'. This landmark speech charts the extraordinary advances that mankind has made to control destiny. Thus, in risk management, controlling risk goes beyond understanding it, measuring it, and weighing its consequences, but taking it on a journey. Boots.com has delivered many customer led initiatives designed to build a base for the future, including extending range (e.g. Beauty Beautique), adding Expertise & Advice (e.g. BMJ), improving website experience (e.g. new look & feel), building our infrastructure (100% warehouse, new IT architecture, out-sourcing fraud), building a strong team, supported by industry experts (increased +10 FTE's). As one of the 20 transformation initiatives for Boots.com, it launched a new web platform on 27th August 2008, which will enable them to move towards a multi channel business model. This platform provides a base from which to build a multi-channel business model. Boots.com believes that the markets in which we operate will fundamentally change over thenext 10 years. Thus, Boots.com must create a multi-channel business model in order to thrive and meet the key challenges we face, as well as exploit opportunities This paper is the Individual Project by taking a Risk Management perspective from the Main Theme: How can multi-channel retailing further expand their product range whilst sustaining customer experience and satisfaction for Boots.com? In the course of the writing, the author has dealt heavily with the literature reviews surrounding Risk Management, Risk Assessment, Risk Analysis, Risk Identification, Risk Mitigation and also its practical applications. The author further focuses on exploiting oppurtunities for Boots.com by considering, insight and interest into risk management aspects of online product range extension, risk management challenges and outcomes for moving into the new market and sustaining competitive advantage, enterprise Risk Management at Boots.com, Inventory, Supply Chain Risk Management for Online Product Range Extension, Financial, legal, and emerging issues in risk, Probabilities, NPVR, Value At Risk and Impact on the Financial Statement; and Real Options and Balance Scorecard. Finally, the author draws conclusion therein and provides recommendation for Boots.co

On fit uncertainty-reducing interventions in retail supply chains

Fit uncertainty is used in this doctoral thesis to describe the customer’s experience of uncertainty about the physical fit of a product when shopping for experience goods. Experience goods are products whose attributes are difficult to ascertain without physical examination. In online retailing, the ability to provide experiential fit information is limited, which poses product flow and inventory challenges for supply chains, including product returns, lost sales, and obsolescence. Thus, product fitting is a critical pre-sales activity for customers to successfully purchase fit-dependent products, and retailers must facilitate the fitting activity in order to reduce unnecessary product handling. To foster improved performance for retail supply chains of experience goods subject to fit uncertainty, this doctoral thesis sets out to explore the effects of fit uncertainty and fit uncertainty-reducing interventions on retail supply chain performance. Fit uncertainty-reducing interventions consist of existing digital product fitting and recommendation technologies. The research designs are included in the five appended research papers. Paper I uses a case survey of retail practices to develop a maturity model of digitalization of product fitting, and it proposes supply chain effects for each of the three maturity levels. Paper II uses three cases, design science, and interventionist research to conceptualize digital product fitting as an intervention that improves product flow and reduces lost sales in retail supply chains for experience goods. Paper III uses case research, quantitative analysis of return transactions, test of an intervention, and mathematical modeling to calculate product return costs associated with fit uncertainty in online retailing. Paper IV uses order and return transactions to investigate how online customers shopping for experience goods seek to mitigate fit uncertainty through different order-placing behaviors, and it assesses the cost implications of the behaviors. Paper V uses order and return transactions to explore the effects of an online apparel-fitting intervention on order performance outcomes and fit uncertainty-mitigating ordering tactics. This thesis theorizes fit uncertainty-reducing interventions. The use of these interventions to facilitate the product-fitting activity can reduce fit uncertainty, leading to many benefits for the retail supply chain in terms of product flow, such as fewer returns and more sales. This thesis contributes to previous research on end-customer behaviors by focusing on order and return behaviors associated with fit uncertainty. The quantification of existent order and return behaviors is an important theoretical contribution to our understanding of the direct effects of fit uncertainty on retail supply chain performance. This thesis theoretically contributes to returns management and to inventory and assortment planning management; its practical contribution supports retail supply chains of experience goods that are reconsidering how they handle fit uncertainty and the unwanted effects thereof. This thesis provides hands-on knowledge on how the interventions work in real life and how they improve retail supply chain performance. Studying the link between fit uncertainty and retail supply chain performance is important for retailers and manufacturers\u27 understanding of end-customer behavior and for improving product development and assortment planning to ensure availability of products that fit

Shelf Based Out-of-Stocks in the Context of Employee Density

The purpose of this paper is to investigate the effect of employee density on shelf based out-of-stocks, i.e. situations when products are physically present at stores, but not on the marked sale positions. In addition, for the first time, these relations were analyzed among different retail formats. By using POS estimation method, shelf based out-of-stock rates were measured for 80 different FMCG products in 97 retail stores. For analyzing the impact of employee density on the average shelf based OOS rate in modern and traditional retail formats, curvilinear hierarchical regression and moderation analyses were used. The results showed that the relation between employee density and shelf based out-of-sock varied among different formats. While it was not significant in convenience stores, in modern formats it was quadratic (stores with too many or too few employees per square meter were related to higher levels of shelf based OOS). The obtained results suggest that store managers should be aware of the effects of employee organization on product availability. The attention was also dedicated to potential problems and managerial implications concerning the employees' number in retail stores, regarding traditional and modern trading formats

Empirical Studies In Retail Operations

This dissertation contains three essays. The first essay, entitled \textit{ Does Inventory Increase Sales? The Billboard and Scarcity Effects in U.S. Automobile Dealerships } looks into the relationship between inventory and demand beyond the obvious stockout effect. Inventory might signal a popular, and therefore a desirable, product, thereby increasing sale. Or, inventory might encourage a consumer to continue her search, thereby decreasing sales. In this paper we seek to identify these effects in U.S. automobile sales. Our primary research challenge is the endogenous relationship between inventories and demand. Hence, our estimation strategy relies on weather shocks at upstream production facilities to create exogenous variation in downstream dealership inventory. We find that the impact of adding a vehicle of a particular model to a dealer\u27s lot depends on which cars the dealer already has. If the added vehicle expands the available set of sub-models (e.g., adding a four-door among a set that is exclusively two-door), then sales increase. But if the added vehicle is of the same sub-model as an existing vehicle, then sales actually decrease. Based on this insight, given a fixed set of cars, they should be allocated among a group of dealers so as to maximize each dealer\u27s variety. The second essay, entitled \textit{ Severe Weather and Automobile Assembly Productivity }, is related to the first one in that presents a detail analysis of the exogenous shock presented there: The weather impact on vehicles assembly lines. It is apparent that severe weather should hamper the productivity of work that occurs outside. But what is the effect of extreme rain, snow, heat and wind on work that occurs indoors, such as the production of automobiles? Using weekly production data from 64 automobile plants in the United States over a ten-year period, we find that adverse weather conditions lead to a significant reduction in production. Across our sample of plants, severe weather reduces production on average by 1.5\%. While it is possible that plants are able to recover these losses at some later date, we do not find evidence that recovery occurs in the week after the event. Our findings are useful both for assessing the potential productivity shock associated with inclement weather as well as guiding managers on where to locate a new production facility. The third essay, entitled \textit{ Integration of Online and Offline Channels in Retail: The Impact of Sharing Reliable Inventory Availability Information }. In this essay we focus the attention on the impact of inventory information disclosure. Increasingly, retailers are integrating their offline and online channels to reduce costs or to improve the value proposition they make to their customers. Using a proprietary dataset, we analyze the impact of the implementation of a buy-online-pickup-in-store project. Contrary to our expectations, the implementation of this project is associated with a reduction in online sales and an increase in store sales and traffic. We interpret the results in light of recent operations management literature that analyzes the impact of sharing inventory availability information online. The implementation of a buy-online-pickup-in-store project provides an exogenous shock to the verifiability of the inventory information that the firm shows to their customers. Our analysis illustrates the challenges of drawing conclusions about complex interventions using single channel data

A Petri net based simulation to study the impact of customer response to stock-out on supply chain performance

Abstract: Based on a Petri-net based simulation model, we investigate the effect of different customer response to stock-out on both the stock-out supply chain and the competing supply chain. Five types of customer stock-out responses are incorporated in the model to quantitatively assess the correlation between customer response and supply chain performance including bullwhip effect (BWE), on-hand inventory, and backlog level. After presenting the results of a series of Petri-net based simulation experiments, we discuss opportunities for both manufacturers and retailers to work better together to mitigate supply chain disruption. We also discuss the value of information sharing on mitigating BWE

Omni-Channel Supply Chain Management: Assessing the Impact of Retail Service Operations in the Retail Supply Chain

The traditional retail environment, which is characterized by a clear division between brick-and-mortar and non-brick-and-mortar retail channels, has been recently disrupted by developments in e-commerce and mobile technologies. The result has been the emergence of omni-channel retailing. Within the reality of this new retail environment, it has been proposed that retailers should develop the necessary capabilities to fulfill consumer demand from anywhere – the store, the distribution center, or via drop-shipping from a supplier – which leads to the emergence of new operational complexities and challenges in the retail supply chain. In light of the growing popularity of these new fulfillment capabilities, it is important to not only consider the financial returns they provide to retailers, but also the potential impacts on the upstream supply chain. Moreover, omni-channel operations will allow retailers to offer new fulfillment services to consumers, such as cross-channel returns or in-store pick-ups, ultimately resulting in new supply chain service outputs in the consumer market. Thus, the aim of this dissertation is to investigate and obtain a holistic understanding of the importance and impacts of omni-channel fulfillment operations for successful retail supply chain management. This will be done by considering three different echelons in the supply chain, (retailer, supplier, and consumer), and investigating how emerging strategies in omni-channel fulfillment impact all three. Using the theoretical underpinning of ambidexterity, Essay 1 investigates how retailers manage their investments and developments pertaining to existing and new fulfillment operations, and how that may lead to improvements in a retailer’s operational and financial performance. To address this research question a structured content analysis in combination with secondary financial data was conducted. To explore how retail omni-channel fulfillment operations impact upstream supply chain members a qualitative research approach was executed in Essay 2 using the case study methodology. Essay 3 employs a series of experimental studies to explore how retail omni-channel fulfillment operations can be used to recover from a stockout. Using equity theory, this essay investigates how, in the case of a stockout, different attributes of omni-channel service operations may impact consumer satisfaction and their evaluation of a retailer’s physical distribution service quality (PDSQ)

Job profiling: How artificial intelligence supports the management of complexity induced by product variety

Firms and supply chains (SC) increasingly are forced to customise products and optimise processes since today’s markets are, on average, more demanding in terms of both costs and customer satisfaction. Generally, when product variety (PV) increases not only improves sales performance, since products offered better fit customers’ expectations, but also increases the complexity in SC processes management, rising operational costs. For that reason, accurate management of product diversity is a fundamental point for the brands' success, which is why it is going to be investigated in that project. Moreover, firms’ managers apply strategies to mitigate or accommodate this complexity, avoiding the customer satisfaction and cost trade-off to remain competitive and survive. However, we were wondering if it is enough. Artificial Intelligence (AI) has emerged to stay. Digitalisation era, data availability, and the improvement in computing power have boomed AI’s potential in improving systems, controlling processes, and tackling complexity. These strengths are suitable to help managers not only to tackle the complexity arising from PV but also to boost the supply chain performance (SCP