Inventory Imbalance Research Articles

Optimizing Retail Inventory Management Through Time Series Analysis

The purpose of this study is to investigate the application of time series analysis in the management of retail inventory, with a particular emphasis on the precision of forecasting as well as the applicability of ARIMA models and seasonal decomposition techniques. This study aimed to evaluate these models' effectiveness in improving the scientific and precise nature of inventory management. This was accomplished by using legitimate retail data. According to the findings, the ARIMA model is effective in managing data that is stable or does not exhibit seasonal patterns. On the other hand, the seasonal decomposition technique demonstrates strong forecasting accuracy in managing data that exhibits seasonal fluctuations. Not only does this research improve the theoretical implementation of time series analysis in the retail sector, but it also provides retailers with practical strategies for mitigating economic losses that are caused by inventory imbalance. When it comes to the management of retail inventory, the findings of the research are significant for improving both overall cost control and customer satisfaction.

Manufacturing and Fraud: Evidence from Price Competition and Lean Inventories

ABSTRACT We examine fraud from an industry competition perspective, oriented from inventory theory. We find that fraud occurs among manufacturers more than nonmanufacturers and that the association between price competition and fraud is significantly more pronounced in the manufacturing sector. Aggregating inventory and cash flow patterns to the industry level, we report that industry inventory imbalance rates, from either excessive stockpiling or inventory leanness, associate with increased future price competition, which subsequently associates with more fraud. However, for manufacturers, the industry-wide prevalence of either excess or leanness amplifies future price competition, which is observed as a U-shaped association that ultimately ties to more fraud. These effects are stronger when extreme leanness is the manufacturing industry’s standard. We also provide evidence that the association between price competition and fraud is comparable to managerial incentives’ association with fraud. Together, our findings contribute to the literature on price competition, inventory management, and corporate misconduct. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M11; M21; M41; L60.

Advancing the marketing‐operations interface in omnichannel retail

Advancing the marketing‐operations interface in omnichannel retail

Covered Interest Parity Arbitrage

Abstract To understand deviations from covered interest parity (CIP), it is crucial to account for heterogeneity in funding costs across both banks and currency areas. For most market participants, the no-arbitrage relation holds fairly well when implemented using marginal funding costs and risk-free investment instruments. However, a few high-rated banks do enjoy CIP-arbitrage opportunities. Dealers avert inventory imbalances stemming from lower-rated banks’ usage of FX swaps to obtain dollar funding by inducing opposite (arbitrage) flows from high-rated banks. Arbitrage trades are difficult to scale, however, because funding costs increase as soon as arbitrageurs increase positions. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Predicting demand for a bike-sharing system with station activity based on random forest

Public bike-sharing (PBS) systems have expanded to major cities around the world in efforts to mitigate air pollution, traffic congestion and traffic accidents. Users can pickup and drop-off bicycles at any station, and thus inventory imbalances can occur. To improve system efficiency, system operators should establish appropriate repositioning strategies based on accurate predictions of demand for bicycles. This study aims to predict station-level demand for pickup and drop-off of bicycles using station activity information. In addition to time and weather information, the number of pickups and drop-offs at a station 1–3 h before the prediction was used as a predictor. A random forest machine learning technique is adopted for the demand prediction. The PBS database in Seoul, South Korea was used for the case study. To compare prediction accuracy by station usage patterns, the stations are classified into four clusters. The analysis results show that prediction accuracy including lag information provides mprovements of up to 20%, and the forecast for drop-off is more accurate than the forecast for pickup. This study practically contributes to increasing operational efficiency and reducing operating costs by improving demand predictability in a PBS system.

Exchange-Traded Funds and Municipal Bond Market

This paper studies the effect of exchange-traded funds' (ETFs) daily holding disclosure on the pre-trade transparency of municipal bond markets. Bonds held by ETFs have significantly smaller price dispersion than similar, non-ETF-held bonds. The relation holds when I exploit a plausibly exogenous variation in ETF disclosure quality, and is stronger for retail trades, on bonds associated with high uncertainty and in stressed markets, suggesting investors benefit more when information is scarce. I further document lower dealers' markup and inventory imbalance in markets of ETF-held bonds - an indication of higher customers' bargaining power resulting from improved transparency. ETF effects also spillover to the primary market, as when a municipality has outstanding bonds held by ETFs, its newly issued bonds have higher valuation and lower price dispersion. Overall, my findings indicate that ETF information disclosure is an important channel through which investors can gain additional insight into the pricing of municipal bonds.

High-Frequency Traders and Single-Dealer Platforms

High-frequency traders (HFTs) mainly operate on public exchanges where multiple third-party buying and selling interests interact with each other. Following recent European regulatory changes (the Markets in Financial Instruments Directive II), HFT single-dealer platforms have emerged on which HFTs conduct bilateral trading as dealers. We find that trading on HFT dealer platforms is detrimental to liquidity on public stock exchanges. HFTs manage inventory imbalances from their dealer operations by trading more aggressively, and reducing their liquidity supply on exchanges, which harms liquidity.

The Virtual Container Yard: Identifying the Persuasive Factors in Container Interchange

The virtual container yard is an effective solution to the container inventory imbalance problem which is a global issue. It causes substantial cost to carriers which inadvertently adds to the prices of consumer goods. The virtual container yard is rooted in the fundamentals of container interchange between carriers. If carriers opt to interchange their excess containers with those who are deficit, a substantial part of the empty reposition cost could be eliminated. Unlike in other types of ships, cargo cannot be directly loaded to a container ship. Slots and containers are supplementary components; thus, without containers, a carrier cannot ship cargo if the containers are not available and vice versa. Few decades ago, carriers recognized slot (the unit of space in a container ship) interchange as a viable solution for the imbalance of shipping space. Carriers interchange slots among them and it also increases the advantage of scale of economies in container shipping. Some of these service agreements between mega carriers have provisions to interchange containers too. However, the interchange mechanism is still not popular among carriers for containers. This is the paradox that prevails in the liner shipping industry. At present, carriers re position their excess empty containers to areas where they are in demand. This research applied factor analysis statistical method. The paper reveals that five major components may influence the virtual container yard namely organization, practice and culture, legal and environment, international nature, and marketing. There are 12 variables that may impact the virtual container yard, and these are explained in the paper.

A method for solving the classification problem with stability in small clinical samples

Container inventory imbalance (or under/over balanced, i.e. one carrier can be in an excess situation while the other will be in deficit) is a severe problem that adds a substantial expense on ocean freight. The ocean containers are built for continuous transportation with cargo. However, due to the imbalance in world trade and other inherent characteristics of shipping the import volumes and export volumes of laden containers in a port are not equal. This variation leads carriers reposition empty containers from excess ports to elsewhere that the empty containers are in demand. If carriers retain containers in a port pending exports demands the sole purpose of containers cannot be met. Thus, it may add storage cost and wear and tear that makes the container shipping uneconomical. This paper appraises the potential of the container exchange and its practical aspects using real container data. Further, it focuses on several factors that may influence container exchange among carriers. Finally, it concludes that the organizational factors play the key role in container exchange thus recommends for further research based on statistical analysis of this paper.

The reality of container exchange between shipping lines: Clearing the pathway to virtual container yard

Container inventory imbalance (or under/over balanced, i.e. one carrier can be in an excess situation while the other will be in deficit) is a severe problem that adds a substantial expense on ocean freight. The ocean containers are built for continuous transportation with cargo. However, due to the imbalance in world trade and other inherent characteristics of shipping the import volumes and export volumes of laden containers in a port are not equal. This variation leads carriers reposition empty containers from excess ports to elsewhere that the empty containers are in demand. If carriers retain containers in a port pending exports demands the sole purpose of containers cannot be met. Thus, it may add storage cost and wear and tear that makes the container shipping uneconomical. This paper appraises the potential of the container exchange and its practical aspects using real container data. Further, it focuses on several factors that may influence container exchange among carriers. Finally, it concludes that the organizational factors play the key role in container exchange thus recommends for further research based on statistical analysis of this paper.

Container inventory management: introducing the 3F model

Container inventory imbalances (CII) can primarily be attributed to global trade imbalances that cause a substantial indirect cost in shipping. Therefore, it is imperative that carriers adopt highly efficient and effective container inventory management (CIM) systems to overcome the CII issues. This research intends to develop realistic guidelines for CIM that minimise CII costs. The components of the 3F model are chosen based on the rating scores given by the experts for 22 common CIM strategies followed by a standard filtration process. It ultimately comprises six strategies, namely: reduce import freight; reduce export freight; service agreements; synchronised budget; agile inventory; and export priority. These variables are rooted in three dimensions namely: freight, forecasting and flexibility. To identify the relative contribution by each component, this paper proposes a double weight allocation procedure for each strategy. The 3F model helps managers to think beyond traditional container reposition and increased profits.

Container inventory management: introducing the 3F model

Container inventory imbalances (CII) can primarily be attributed to global trade imbalances that cause a substantial indirect cost in shipping. Therefore, it is imperative that carriers adopt highly efficient and effective container inventory management (CIM) systems to overcome the CII issues. This research intends to develop realistic guidelines for CIM that minimise CII costs. The components of the 3F model are chosen based on the rating scores given by the experts for 22 common CIM strategies followed by a standard filtration process. It ultimately comprises six strategies, namely: reduce import freight; reduce export freight; service agreements; synchronised budget; agile inventory; and export priority. These variables are rooted in three dimensions namely: freight, forecasting and flexibility. To identify the relative contribution by each component, this paper proposes a double weight allocation procedure for each strategy. The 3F model helps managers to think beyond traditional container reposition and increased profits.

Dynamic Mix-Bundling with Limited Inventories

Consider a revenue-maximizing provider who holds inventories for multiple components and adopts mix-bundling to sell a line of products made up of individual components and bundles that comprise these components. Consumers arrive over a finite time horizon up to the time of consumption and each of them requests a component or a bundle. We first study the setting in which the provider holds inventories for two components and adopts quantity-based control to manage selling, whereby she accepts a consumer request for a product if its price is above the associated marginal value. Our results show that a lower inventory level for a component increases the marginal value of a product that comprises this component – the scarcity effect, and a higher inventory level of a component increases the marginal value of the other component – the complementarity effect. The scarcity effect in general outweighs the complementarity effect in influencing optimal policies. While the value of package decreases as time elapses, that of a specific component is not necessarily monotone with time due to inventory imbalance. In the general setting, the provider has inventories for a number of components and adopts price-based control to manage selling. We develop and apply a heuristics to dynamically decide bundle set, component selling prices and bundle discount, to find that the value of mix-bundling in revenue generation depends crucially on the correlation of consumer valuations for components, as well as the availability and dispersion of initial component inventories.

Mitigating Spillover in Online Retailing via Replenishment

Online purchases constitute about one-tenth of U.S. retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing’s operations problems; thus, there is an opportunity to understand and improve these novel supply chains. One key characteristic of the inventory systems for online retailing is demand spillover, whereby a stockout at a fulfillment center (FC) results in demand spilling over to another FC. For this context we examine how to allocate inventory to the FCs under a periodic-review joint-replenishment policy, with an objective to minimize outbound shipping costs for a fixed amount of inventory. We first show how traditional decentralized allocation policies may perform suboptimally and induce dynamics (whiplash) that result in costly spillover. We find that this phenomenon increases with the prevalence of local stockouts and with the level of inventory imbalance. We then describe that inventory imbalance occurs in online retailing because of operational realities and provide evidence based on real data. Finally, we propose a heuristic to allocate inventory accounting for possible spillover during the lead time. We test the heuristic by a simulation and show that it performs better than the status quo policy, is robust to operational realities, and captures over 90% of the possible improvement as compared to a pseudo-optimal policy. The online appendix is available at https://doi.org/10.1287/msom.2016.0614 .

The Benefits of Container Exchange between Carriers: A Case Study

The paper proposes that the container exchange mechanism is an effective solution to the container inventory imbalance problem. Drewry Shipping Consultants state that about 20% of total container flows at sea around the world are empty, and the costs of re-positioning are about USD 400 per container. There is a tremendous pressure on reducing logistics cost and carbon footprint. The fundamental reason for Container Inventory Imbalance (CII) is the external trade imbalance of countries. A major challenge revolves around re-positioning of empty reusable containers. It is noted that the exchange mechanism works well with respect to the shipping space (slots) that has proved immense benefits to carriers as well as to the industry in general. However, the carriers believe that there is no opportunity for container exchange as the intrinsic trade imbalance is commonly applicable to all carriers. The industry has not made any attempt to evaluate the benefits of container exchange due to this myopic view.

The Global Impact of Container Inventory Imbalance and the Factors that Influence Container Inventory Management Strategies

Container shipping celebrates its 60th anniversary in 2016, as an innovation that had a tremendous impact on the global supply chain. This paper focuses on the impact of container inventory imbalance that mounts a substantial pressure on global supply chains. The primary objective of this paper is to explore best market practices and ascertain as to what factors influence these strategies. It also evaluates the impact of container inventory imbalance to the global supply chain. The study refers to interviews with industry experts and questionnaire responses from shipping lines operated in Sri Lanka in addition to the desk research to explain the impact of the container inventory problem in the global scale. If carriers provide the right quantity of containers demanded by exporters at the right location at the right time, the optimum supply chain performance could be guaranteed. The consequences of container fleet imbalances are ultimately borne by exporters, importers, consumers, traders and even — inadvertently — other players in the cargo supply chain of international trade. Therefore, carriers need an effective solution to the global container inventory imbalance problem.

Segmented Money Markets and Covered Interest Parity Arbitrage

This paper studies the validity of Covered Interest Parity (CIP) -- once seen as the most robust no-arbitrage relationship in international finance, but now deemed broken. We argue it is crucial to account for the effects of money market segmentation and funding liquidity premia, especially in the post-crisis environment characterized by a significant dispersion of money market rates. We find that CIP in fact holds remarkably well when considering money market rates that adequately capture funding liquidity premia. Our approach informs about the forces that effectively limit arbitrage activity in FX swaps and money markets. While arbitrage opportunities are difficult to reap for the vast majority of players, a narrow set of banks does indeed face risk-less arbitrage opportunities. These arise from the constellation of money market segmentation, the abundance of excess reserves and their remuneration in central banks' deposit facilities.

Mitigating Spillover in Online Retailing via Replenishment

Online purchases constitute about one tenth of US retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing’s operations problems; thus, there is an opportunity to understand and improve these novel supply chains. One key characteristic of the inventory systems for online retailing is demand spillover, whereby a stockout at a fulfillment center (FC) results in demand spilling over to another FC. For this context we examine how to allocate inventory to the FCs under a periodic-review joint-replenishment policy, with an objective to minimize outbound shipping costs for a fixed amount of inventory. We first show how traditional decentralized allocation policies may perform suboptimally and induce dynamics (whiplash) that result in costly spillover. We find that this phenomenon increases with the prevalence of local stockouts and with the level of inventory imbalance. We then describe why inventory imbalance occurs in online retailing due to operational realities and provide evidence based on real data. Finally, we propose a heuristic to allocate inventory accounting for possible spillover during the lead time. We test the heuristic by a simulation and show that it performs better than the status quo policy, is robust to operational realities, and captures over 90% of the possible improvement as compared to a pseudo-optimal policy.

Evaluation of expected payoff through container interchange between shipping lines: a solution to container inventory imbalance in Sri Lanka

This paper evaluates the expected economic benefit that could be achieved by interchanging containers between shipping lines by employing the popular game theoretic approach. It comprehensively discusses the causes underlying the container inventory imbalance; the absence of collaboration (work alone) with respect to containers; the models of collaboration (win-win situation); and the quantitative and qualitative benefits that could be achieved through shipping alliances. This paper suggests barriers to a collaborative approach by carriers as confidentiality of information; regulatory, competition and social issues; and business philosophy of firms. This paper identifies the core areas relevant to empty maritime container inventory imbalance including external trade volumes, commodity types, logistical issues, seasonality, container types and sizes. The ultimate objective is to ascertain the appropriateness of collaboration as a solution to container inventory imbalance in Sri Lanka. Therefore, attempts were made to calculate economic benefits of container interchange using specific models. Furthermore, this paper looks into those aspects that make the implementation of collaboration more difficult (inhibitors) despite the existence of active agreements between shipping lines and the opportunities and facilitators.

E-SCM-E- Supply Chain Management: Potentialities and Prospects in Indian Manufacturing Industries

Most companies designed their supply chains in more stable times, and these designs have now become obsolete. When demand spikes up, companies often suffer from material shortages and poor customer service. When the market suddenly lurches from boom to bust, many companies are caught with excess inventory. Product proliferation can also lead to inventory imbalances. The business can use the Internet to gain global visibility across their extended network of trading partners and help them respond quickly to changing business conditions, such as customer demand and resource availability.