a b s t r a c tWe examine the impact of product variety decisions on an operational measure -unit fill rate -and on sales performance. Results are estimated using weekly data over three years from 108 distribution centers of a major soft drink bottler. Our results show that fill rates are negatively associated with product variety at a diminishing rate. In addition, we examine the total effect of product variety on sales including both the direct effect and the indirect effect through operations performance. The total impact of product variety on sales initially is positive, although at a diminishing rate. However, beyond a certain level, increased product variety actually results in lower sales; that is, "too much of a good thing". Thus, the findings provide a comprehensive understanding of the impact of product variety on operations and sales performance.
The use of the Internet in transactions between retailers and consumers has altered exchange activities involving products and information in a number of supply chains. This phenomenon is highlighted in the research on information-exchange activities in supply chains that fulfill consumer orders placed over the Internet (Bailey 1998;Bakos 1997). However, little research attention has been given to mechanisms leading to product-fulfillment improvements in these settings (Cooke 2000;Leon 2000). This paper addresses that gap by studying mechanisms that enable the improvement of fulfillment operations in supply chain firms that directly or indirectly participate in filling online orders.Consistent with Ballou (1992) and Bowersox and Closs (1996), two dimensions of distribution performance in the fulfillment of online consumer orders are considered: inventory performance and product-release performance. Both dimensions are defined in terms of supply chain responsiveness (Chopra and Meindl 2001). Inventory performance refers to measures of inventory throughput in the cost-efficient fulfillment of end consumer orders from in-stock inventories across the supply chain. Product-release (or release) performance refers to wait times associated with the transport of cost-efficient product volumes bound to and from inventory locations across different supply chain echelons.Two mechanisms, inventory location consolidation and market demand growth are assessed, that are theorized to facilitate improvements in both performance dimensions. These mechanisms are within the control of Internet retailers and are also part of the decision-making portfolio of firms located upstream in the supply chain. Inventory location consolidation stems from inventory centralization within and across supply chain echelons. Market growth, while dependent on macroeconomic forces affecting demand, can be leveraged at the firm level through market share expansion resulting from customer service improvements (Innis and La Londe 1994) and/or lower prices (Porter 1974). Furthermore, market share expansion may result from retailers offering a wider assortment of products across multiple levels of popularity (Emmelhainz, Emmelhainz, and Stock 1991). LOGISTICS, Vol.24, No.2, 2003 205 As explained in the next section, the effects of inventory location consolidation and market demand growth on inventory and release performance hinge on Internet retailers and their suppliers accessing orders that arrive one at a time through a unified point of contact with shoppers, i.e., the website. The effects also depend on the disintermediation of echelons and location postponement of inventories across the supply chain once location and timing attributes of customer orders and inventory are decoupled. JOURNAL OF BUSINESSThe next section also details how inventory location consolidation and market demand growth impact performance through statistical, scale, and scope economies. Statistical economies stem from the pooling of uncertainty within and across echelons (Evers ...
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