EURO 2025 Leeds
Abstract Submission

50. Collaborative Efforts for Improving Process Inefficiency in Retailer’s Backroom: A Game-Theoretic Analysis

Invited abstract in session TA-47: Retail Inventory Management, stream Retail Operations.

Tuesday, 8:30-10:00
Room: Parkinson B08

Authors (first author is the speaker)

1. Ashutosh Sarkar
Quantitative Methods and Operations Management, Indian Institute of Management Kozhikode
2. Varun Gupta
Management & Marketing, University of North Georgia

Abstract

Retail backrooms operations can cause discrepancies in inventory records due to product misplacement, damage during handling and transportation, theft, and transaction errors. Such errors cause stock outs, lost sales, and dissatisfied customers. While reactive measures like, periodic audits have been extensively evaluated, proactive strategies such as process optimization, adoption of RFID technology for real-time tracking, and closer collaboration between suppliers and retailers are also equally effective. In this context, understanding the individual motivations and incentives for collaborative efforts for process improvement is necessary, especially in a decentralized supply chains. Therefore, we develop a game-theoretic model to capture the dynamics of inventory movement from the backroom to the shelf. The model incorporates uncertainty in the retailer’s operational efficiency and randomness in inventory errors and analyses the impact of different cost structures, the relationship between effort and improvement, and the structure of the supply chain on collaborative efforts and overall profitability. Moreover, we explore the effectiveness of a cost-sharing contract, where the supplier partially subsidizes the retailer’s investment, as a mechanism to incentivize collaboration. Our findings provide valuable insights into the conditions under which collaboration becomes beneficial and offer managerial implications for optimizing backroom operations.

Keywords

Status: accepted

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