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The Effect of Inventory Level on Product Availability and Sale

Author

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  • Aleksandar Grubor
  • Nikola Milićević
  • Nenad Djokic

Abstract

By increasing inventories, retailers attempt to raise service levels, and thus increase sale. However, in addition to a positive impact on product availability and sale, higher inventory levels may cause problems in performing in-store activities. As poor backroom-to-shelf replenishment process emerges as one of the most common causes of stock-out situations, this article compares store and on-shelf FMCG product availability at SKU level in different stores of a single retailer. In relation to this, besides direct, we have also investigated the indirect effect of inventory level on sale, by using store and shelf out-of-stocks as mediators. The results of the research showing much higher level of shelf- compared to store stock-out rate confirmed the existence of the problem in the realization of internal product flows within retail stores. However, despite the occurrence of this problem, besides direct positive effect of inventory level on sale, its indirect effect was positive as well. Therefore, these results were analysed in the context of other similar studies. In addition to empirical research, the article also discusses certain implications of more efficient organisation of in-store activities.

Suggested Citation

  • Aleksandar Grubor & Nikola Milićević & Nenad Djokic, 2016. "The Effect of Inventory Level on Product Availability and Sale," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(2), pages 221-233.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:2:id:556:p:221-233
    DOI: 10.18267/j.pep.556
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    References listed on IDEAS

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    Cited by:

    1. ReynerPérez-Campdesuñer & Alexander Sánchez-Rodríguez & Gelmar García-Vidal & Rodobaldo Martínez-Vivar & Margarita De Miguel-Guzmán, 2020. "Influence of theStructure of Product Portfolio Performance in aSmall Business Retail," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 10(1), pages 23-34, January.
    2. Goran Avlijas & Vesna Vukanovic Dumanovic & Miljan Radunovic, 2021. "Measuring the Effects of Automatic Replenishment on Product Availability in Retail Stores," Sustainability, MDPI, vol. 13(3), pages 1-14, January.
    3. ReynerPérez-Campdesuñer & Alexander Sánchez-Rodríguez & Gelmar García-Vidal & Rodobaldo Martínez-Vivar & Margarita De Miguel-Guzmán, 2020. "Influence of theStructure of Product Portfolio Performance in aSmall Business Retail," International Journal of Business and Social Research, LAR Center Press, vol. 10(1), pages 23-34, January.

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    More about this item

    Keywords

    sales; product availability; inventory level; customer service;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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