A pilot project for evaluating the impact of AUTO-ID technologies on out-of-stock

This research aims to validate a model for assessing the economic impact of radio frequency identification (RFID) technology on stock-outs of items at retail stores in the context of fast-moving consumer goods (FMCG). It is widely recognized by practitioners and researchers that reducing stockouts will increase consumer satisfaction and loyalty, thereby reducing consumers' necessity to seek required goods from competing retailers and thereby potentially switching their loyalty and buying habits. Thus, consumer loyalty to a particular retailer is now considered to be as important as brand loyalty, if not more so. Empirical on-shelf availability data used in this article were collected during a two-week pilot study at two Italian retailers' stores. Availability data for a total of seventy-seven products from nine product categories was measured and a mathematical model adapted from extant literature was used to provide an estimate of RFID impact. This work is the first part of a wider research project whose ultimate aim is to identify the root causes of stock-outs and to test the use of RFID technology as a possible solution to out-of-stock (OOS) products. Despite a recent flourish of publications discussing this topic and the prioritization of this issue by practitioners, there is as yet no definitive model for stock-out root cause analysis. This research also has significant practical implications and the wider project is in part supported by three major Italian retailers and a number of their first-tier suppliers, thus emphasizing the importance of this research.