Inventory record inaccuracy dynamics and the role of employees within multi-channel distribution center inventory systems

The dynamics of inventory record inaccuracy (IRI) remain under-explored in a multi-channel distribution center (MCDC) setting. Additionally, how employees interact with the rest of an MCDC's inventory system to impact IRI is yet to be explored. To address these issues, our research adopts a multi-method exploratory approach to understand the nature and existence of IRI between cycle counts in a multi-channel environment based on continuous, daily IRI-related observations. These data are then used to develop a system dynamics model to further explore the interaction between employees and the rest of the inventory system. Our case study finds substantial levels of IRI on a daily basis, with varying levels of consistency and a bias toward negative errors, raising concerns as to the suitability and stability of MCDC inventory systems. We also find varying IRI effects depending on the channel, with inventory density, in particular, having mixed influences. Further, we provide evidence for substantial volatilities of daily IRI likely generated by employee-system interactions in the MCDC. Without the daily perspective, such evidence would otherwise have remained unobserved. Our system dynamics model also provides a novel framework to show how employees interact with MCDC inventory characteristics to affect the dynamic level and stability of IRI. This research also provides suggestions for managing and further examining these phenomena.