Integrated Inventory Management Control Framework

Abstract

The concept of minimum display quantity (MDQ) is unavoidable in brick-and-mortar retailing format owing to which, retailers need to ensure a minimum level of inventory displayed at each store irrespective of the revenue or inventory turns generated by a particular store. It is observed that majority of bricks-and-mortar retailers in India assume; (a) existing inventory management system is ideal to their store, (b) software solutions record accurate inventory movement, (c) involving store management team in inventory related decision making is risky/biased and most importantly, (d) loss of sale due to stockouts is inevitable. Such assumptions and widely followed practice have created a predisposition and mindset in store managers and they believe that their store delivers revenue and profit to the best of its potential with the inventory which is made available to them through existing inventory management system and we cannot avoid a number of instances consumers are unsatisfied due to stockout situations. In this research, we have analysed the existing decision-making process and control systems related to inventory management of a select retailer, attempted to design a new framework and applied the same through an experiment to evaluate the change in (a) overall store profitability, and (b) inventory related key performance indicators.