The impact of product variety on fill rate, inventory and sales performance in the consumer goods industry

Abstract

PurposeThe impact of product variety decisions on fill rate, inventory and sales performance in a consumer goods company has been examined. From a marketing perspective, it is possible to leverage sales, reach new segments and consequently increase competitiveness when there is a greater product variety on the market. However, operations and logistics professionals indicate potential impacts on the supply chain, such as production, storage and distribution complexity. The nature of the product variety-cost-sales performance relationship is not clear, and empirical evidence about whether and how operations cost and sales performance increases with variety is inconclusive.Design/methodology/approachThe multiple linear regression and the Tobit regression techniques were applied over a seven-year horizon of data from a business intelligence platform of a consumer goods company.FindingsOur results show that sales performance is negatively associated with product variety. The total effect of product variety on sales performance has been examined, including both the direct effect and the indirect effect through inventory and fill rate. Therefore, the findings provide a comprehensive understanding of the impact of product variety on operations and sales performance.Originality/valueSeveral studies have researched the impact of product variety on fill rate, inventory and sales performance separately; however, the research of the impact and the relationship of these factors is scarce and limited.

Fashion involvement, opinion-seeking and product variety as stimulators for fashion e-commerce: an investigated model based on S-O-R model

“…Objective stimulus, product variety "PV" Nowadays, businesses emphasize the trend for increasing the variety of product offerings available in the market as a way of widening consumer choices and creating competitive opportunities (Lyons et al, 2020;Um et al, 2017). Consumers are heterogeneous and widely distributed across the marketplace as their perceived needs, social values, preferences and usage scenarios vary, which requires more product choices to meet those demands (Bodur et al, 2015;ElMaraghy et al, 2013;Santos et al, 2020). Product variety "PV" is described as diversity of fabricated choices of a product (design, function, packaging or size features) offered by a brand/retailer within a single timescale (Agrawal and Vinodh, 2019;Triantafillidou et al, 2017).…”

“…Increasing "PV" improves brand's competitiveness by positively affecting revenue, market share, business profitability through satisfying the needs of larger segment of consumers (Bech et al, 2019;Mehrjoo and Pasek, 2014;Sorkun, 2019). Yet within brick-and-mortar scenarios, variety's positive influences are found to reach a limit, where negative effect takes place with very wide ranges of products as it increases consumer's confusion and may affect products price and quality (Santos et al, 2020;Triantafillidou et al, 2017). In response to these attributes, brands have taken advantage of online channels to offer wider range of products, which has led consumers to describe their shopping experience as enjoyable (Arora and Aggarwal, 2018;Medini et al, 2020).…”

Implementing E-Commerce from Logistic Perspective: Literature Review and Methodological Framework

“…Results show a strong negative relation between fulfillment ownership and product variety and weight/size, and a strong positive relation with the firm's age and gross margin. Models and methods have been carried out to configure DCs in relation to e-commerce, focusing on the inventory level management and inventory location [15,[98][99][100][101][102][103]. Alawneh et al [104] presented a multi-item inventory model considering warehouse capacity, demand and lead-time uncertainty for a dual-channel warehouse, in which the structure is divided in a fulfilling online orders area and storing and fulfilling offline orders area.…”

Integration of the Design Structure Matrix (DSM) and Modular Function Deployment (MFD) methods applied to mass customization aiming product modularization: a case study on heavy vehicle suspension

“…The variety of the products impacts the flexibility of the production, resulting in complexity in the production process operationalization. In production systems of large-scale and largevariety, like trucks and buses production, there is no academic and empirical consensus on how to deal with their complexity ( [6]; [7]; [8]; [9]). This work intends to contribute to this relevant production chain by presenting a way to improve industrial competitiveness with the concept of modularization utilizing a case study.…”

“…Therefore, it is possible to maintain the personalization of products and production flexibility through modularity. The modules combined through the product family increase its variants to meet customer needs while keeping costs and complexity low and influencing product innovation ( [9]; [17]; [12]; [18]; [19]; [20]; [21]).…”