Misallocation of Size Variants in Apparel Product Purchases: Root Causes and Possible Remedies

Abstract

This study empirically investigates the retailers’ problems in allocating size-variants while procuring apparel items from the supplier. Owing to the limited resources and dynamic relationship among the supply chain participants, retailers may not secure sufficient order quantities, ultimately resulting in stockouts and service failures to consumers. A retailer must determine not only the appropriate order quantity of a product but also the proportion of the order quantity of each variant. Imbalance in allocation of variants may lead to a stockout at the variant level. In this study, we identify the causes of misallocations in size-variants of apparel products, considering that the demand for a certain apparel size is relatively stable. We hypothesize and evaluate the impacts of previous stockout frequency, seasonality, and stockout-based substitution. The empirical findings of this study indicate that more previous stockouts, summer and winter seasons, and demand substitution of larger-size variants for the variants sold-out aggravate misallocation problems. This is the first study to explain product variant level stockouts from the viewpoint of resource allocation. This study is meaningful for providing practical implications based on the findings.