The impacts of inventory record inaccuracy and cycle counting on distribution center performance

Abstract

Paper aims

The objectives of this paper are: (i) to analyze the impacts of Inventory Record Inaccuracy (IRI) on picking productivity (PP), lost sales (LS), and warehouse capacity utilization (WCU) for different warehouses; (ii) verify if the Cycle Counting (CC) implementation is sufficient to reduce IRI and (iii) the number of CC operators to maintain warehouse performance.

Originality

A causal loop diagram in detail of the IRI and CC variable's effects in receiving and picking processes is developed. IRI is separated into ghost and hidden inventory to represent the actual effects in WCU, LS, and PP.

Research method

A dynamic system model is built. Simulations are performed for the five categories of warehouse performance with different numbers of CC operators.

Main findings

IRI impacts in all warehouses simulated, so managers should monitor IRI besides employee productivity. CC can reduce IRI in all types of warehouses. The number of CC operators to be implemented is different for each warehouse.

Implications for theory and practice

Several implications for theory and practice are discussed. For example, IRI impacts more ADV and BIC warehouses without CC implementation. In TYP, ADV, and BIC warehouses CC is sufficient to reduce IRI. In MO and DIS warehouses, other improvements are needed.

Keywords
Warehouse performance; Simulation; Inventory management; Picking productivity; System dynamics