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Accurate inventory records are key to effective store execution, affecting forecasting, ordering, and replenishment. Prior empirical research, however, shows that retailer inventory records are inherently inaccurate. Radio Frequency Identification (RFID) enables visibility into the movement of inventories in the supply chain. Using two different field experiments, the current research investigates the effectiveness of this visibility in reducing retail store inventory record inaccuracy (IRI). Study 1 used an interrupted time‐series design and involved daily physical counts of all products in one category in 13 stores (8 treatments and 5 controls) of a major global retailer over 23 weeks. Results indicate a significant decrease in IRI of approximately 26% due to RFID‐enabled visibility. Using an untreated control group design with pre‐test and post‐test, Study 2 expands the number of categories to five and the number of stores to 62 (31 treatment and 31 control stores). Results show that the effectiveness of RFID in reducing IRI varies by category (ranging from no statistically significant improvement to 81%). Results also suggest that RFID ameliorates the effects of known determinants of IRI and provide the key insight that the technology is most effective for product categories characterized by these determinants.
Hardgrave et al. (Tue,) studied this question.