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Relationships between inventory, sales and service in a retail chain store operation

Chris Dubelaar (Department of Marketing, Monash University, Australia)
Garland Chow (Faculty of Commerce, University of British Columbia, Vancouver, Canada)
Paul D. Larson (COBA, University of Nevada, Reno, USA)

International Journal of Physical Distribution & Logistics Management

ISSN: 0960-0035

Article publication date: 1 March 2001

9775

Abstract

Effective inventory management is critical to retailing success. Surprisingly, there is little published empirical research examining relationships between retail inventory, sales and customer service. Based on a survey of 101 chain store units, this paper develops and tests a series of hypotheses about retail inventory. Seventy‐five percent of the store owners/managers responded to the mail survey. As expected, significant positive relationships were found between inventory, service and sales. Specifically, support was found for the theory that inventory is a function of the square root of sales. Also, greater product variety leads to higher inventory, and service level is an exponential function of inventory. Finally, demand uncertainty was found to have no apparent effect on inventory levels.

Keywords

Citation

Dubelaar, C., Chow, G. and Larson, P.D. (2001), "Relationships between inventory, sales and service in a retail chain store operation", International Journal of Physical Distribution & Logistics Management, Vol. 31 No. 2, pp. 96-108. https://doi.org/10.1108/09600030110387480

Publisher

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MCB UP Ltd

Copyright © 2001, MCB UP Limited

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