Error Generation, Inventory Record Inaccuracy (IRI) and Effects on Performance: A Dynamic Investigation

Abstract

One of the aspects of a good inventory control system is low Inventory Record Inaccuracy (IRI). IRI control ought to be an integral part of PLM by helping to further streamline the production, transportation and service stages. This paper contributes to the expanding debate on linking error generation to Inventory Record Inaccuracy (IRI) and its ensuing effects on performance. Methods of discovering and eliminating the root causes of IRI are presented. A System Dynamics (SD) simulation model is used to examine and confirm the substantial impact of error generation and IRI on workflow. The results of the model show that even a small undetected source of IRI can accumulate and eventually destabilize the entire system.

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

“…The Ghost inventory occurs when the registered logical inventory is greater than the physical, existing only in the WMS or equivalent system (Drohomeretski & Favaretto, 2013;Hachem et al, 2016). The second divergence occurs when the registered logical inventory is lower than the physical one (underestimated inventory), called in this work "Hidden inventory" (Hachem et al, 2016).…”

“…Several studies have been applying SD to studying IRI's problems, such as Agarwal et al (2006), Barratt et al (2018), and Hachem et al (2016). However, few academic studies address IRI and warehouse operations (Barratt et al, 2018).…”

“…Authors such as Agarwal et al (2006), Barratt et al (2018), andRaman (2008) argue that a higher frequency of CC can contribute to reduced IRI levels. However, it is time-consuming, generates labor costs, and can reduce operational efficiency (Hachem et al, 2016). It is possible to note that, even if the literature supports CC implementation, no research has evaluated the efficiency of CC operation to reduce IRI in a system dynamic model.…”

“…• the impacts of IRI and CC on warehouse performance are evaluated through performance indicators such as picking, lost sales, and warehouse capacity utilization; • this research considers the influence of Ghost stocks (when the logical inventory is greater than the physical inventory) and Hidden stocks (when the logical inventory is lower than the physical) separately, which are results of operational errors (Hachem et al, 2016). In addition to this introductory part, this study consists of the following sections: section 2 presents the theoretical background of IRI; section 3 states the methods used in the research, as well as the necessary steps for implementing the dynamic model; section 4 shows the results of implementing the dynamic inventory system; section 5 discusses the main results obtained; and finally, section 6, presents the main conclusions of the study with the future research directions.…”

“…There are two kinds of inventory divergences studied in this research. The first one is the overestimated inventory, named in the literature as "Phantom inventory" or "Ghost inventory" (Hachem et al, 2016). The Ghost inventory occurs when the registered logical inventory is greater than the physical, existing only in the WMS or equivalent system (Drohomeretski & Favaretto, 2013;Hachem et al, 2016).…”