Execution: The Missing Link in Retail Operations

TLDR

Retailers invest heavily in IT planning systems yet struggle with inventory record inaccuracies and misplaced SKUs, which vary widely across stores and undermine performance. The study aims to identify the drivers of inventory record inaccuracies and misplaced SKUs across stores and propose actionable improvements. The authors analyze store‑level variations to uncover the underlying causes of these execution problems. The analysis shows that 65% of inventory records are inaccurate, misplaced SKUs cause one in six customers to fail to locate products, and these execution failures cut profits by more than 10%.

Abstract

In spite of making substantial investments in information technology planning systems, retailers are struggling with two execution problems— inventory record and 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.