Abstract

In spite of making substantial investments in information technology planning systems, retailers are struggling with two execution problems—"inventory record inaccuracy" and "misplaced stock keeping units (SKUs)"—that are hurting their performance and ability to satisfy customers. At one leading retailer, sixty-five percent of their inventory records were inaccurate (i.e., recorded inventory levels did not reflect actual inventory levels). Misplaced SKUs, at another leading retailer, prevented one in six customers who requested help from a sales associate from finding the products that were available in a store. These execution problems reduce profits by more than 10%. Moreover, performance along these two dimensions of execution varies substantially among stores within the same chain that use identical information technology. By examining the systematic differences that exist among stores, this article identifies the drivers of inventory record inaccuracy and misplaced SKUs and recommends steps retailers can take to improve operational execution in their chains.