Destruction Decisions for Managing Excess Inventory in E-Commerce Logistics

Pourya Pourhejazy

doi:10.3390/su12208365

Abstract

The Internet has brought about new possibilities for innovation and radically changed business activities. Internet shopping is a prime example of increasing popularity, which is exacerbated due to the recent pandemic. It is expected that e-commerce will accommodate more than a quarter of the total retail sales worldwide in the next few years. Given the characteristics of e-commerce, inventory management is of paramount importance for an effective and timely response to the online customers’ demand. Despite its relevance, the issue of warehouse excess inventory is not sufficiently studied in the operations management literature. This study explores the factors, including sustainability and strategic considerations, that influence the inventory destruction decisions as one of the alternatives for managing excess inventory. Applying the Fuzzy Decision-Making Trial and Evaluation Laboratory (DEMATEL) method, the interrelationships between the decision factors are investigated and the decisive considerations are identified. Overall, the outcomes provide insights for the e-commerce practitioners and offer directions for modeling and managing inventory destruction decisions.

Highlights

Electronic commerce (e-commerce) has become increasingly important due to its positive environmental impacts in reducing emissions and energy consumption of various means by replacing traditional shopping [1]
Inventory destruction decisions in response to urgent reallocation needs may result in myopic decisions, a forward-looking proactive destruction decision may be necessary to make buffer space for unpredictable situations, like a surge in the demand of a certain product, for example, masks and personal production equipment and ventilators in the recent pandemic
Time-to-implement is a critical aspect of inventory destruction such that it is not too early to destruct the inventory of a certain product and miss possible chances for alternative approaches like markdowns and gifting, and not too late that keeping the inventory results in further losses which, in turn, may result in a reactive and hasty myopic decision

Summary

Introduction

Electronic commerce (e-commerce) has become increasingly important due to its positive environmental impacts in reducing emissions and energy consumption of various means by replacing traditional shopping [1]. In 2019, e-commerce accounted for more than 15 percent of the overall sales worldwide [2] and has seen exponential growth due to the recent pandemic [3,4]. In this situation, staying competitive in the marketplace relies on the e-commerce companies’ operational agility [5] and their ability to offer responsive services. The tight schedules of online retailers make flexibility a critical factor influencing the competitiveness of e-commerce platforms [9]. Considering the large depth and width of the products available in the warehouses, unnecessary excess inventory may negatively influence the operational flexibility, causing longer lead times, additional logistics costs [10], wastes and spoilage [11], and hinders the restock of other goods that may result in demand loss [12]

Results

Discussion

Conclusion