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The Impact of Automatic Store Replenishment Systems on Retail

DISSERTATION
of the University of St. Gallen Graduate School of Business Administration, Economics, Law and Social Sciences (HSG) to obtain the title of Doctor of Business Administration

submitted by

Alfred Angerer
from Austria

Approved on the application of Prof. Dr. Daniel Corsten and Prof. Fritz Fahrni, PhD

Dissertation no. 3123

The University of St. Gallen, Graduate School of Business Administration, Economics, Law and Social Sciences (HSG) hereby consents to the printing of the presented dissertation, without hereby expressing any opinion on the views herein expressed. St. Gallen, November 17, 2005

The President

Prof. Ernst Mohr, PhD

dedicado a las dos mujeres más importantes de mi vida: mi madre y Anne

VI

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Foreword
Fast moving consumer goods retailing is a highly competitive market. European retailers are continuously aiming to improve customer loyalty by offering good service. At the same time, they are struggling to reduce costs in order to stay competitive. One technology that promises to decrease the number of out-of-stocks while simultaneously reducing store handling costs is automatic store replenishment (ASR). At the heart of ASR systems lies software that automatically places an order to replenish stocks. Many European grocery retailers have started to implement such decision support systems.

Surprisingly, although several retailers have automated their order process in the last few years, there is almost no academic source examining this topic at the level of the store. It is worth noting that other technologies in retail, such as RFID (Radio Frequency Identification) and the introduction of the barcode, have received far greater attention from the public and from researchers. Furthermore, while the topic of extent and root-causes of retail out-of-stock has received substantial interest over the course of the last years, the question to what extent existing and new practices remedy OOS is largely unanswered. In particular, there is a debate whether ASR improve or worsen OOS. Therefore, Dr. Alfred Angerer has well chosen a topic of both managerial and academic relevance.

Although there are many success stories from practitioners describing the enormous advantages of introducing automatic store replenishment systems there has been limited empirical proof of this. To the best of my knowledge no conceptual framework exits that can help practitioners to choose an adequate automatic replenishment system. In order to develop such a model research on relationship between replenishment performance (e.g. OOS rate, inventory levels) and contextual variables (such as store and product characteristics) is required. Finally, it is not clear how retailers have to adapt its organization and processes to best support the chosen ASR system.

Dr. Angerer confidently identifies and covers several research gaps and manages to give answers to this research gaps by a skilful combination of quantitative and qualitative research methodologies. In a first part an exhaustive data set of a European retailer is examined. With this data analysis the performance of replenishment system before and after the introduction of ASR systems is compared.

VIII

Dr. Angerer is able to statistically prove and quantify the positive impact of such systems on inventory levels and out-of-stock rates. In the second part, several case studies illustrate how ASR systems are implemented in practice. The given recommendations on store processes help retailers to benefit most from automatic replenishment systems.

Overall, this thesis makes an important contribution to the field of retail operations − in practice and theory. I personally wish Dr. Angerer's work wide attention in both academic and practitioner circles.

Prof. Dr. Daniel Corsten

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Acknowledgment
Rarely is a doctoral thesis the contribution of a single person....
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