Topic
Channel stuffing
About: Channel stuffing is a research topic. Over the lifetime, 38 publications have been published within this topic receiving 617 citations.
Papers
TL;DR: In this paper, the authors proposed a proportional discount sharing agreement for the Efficient Consumer Response (ECR) data set to solve the channel coordination problem in a win-win fashion.
Abstract: Consumer sales promotions are usually the result of the decisions of two marketing channel parties, the manufacturer and the retailer. In making these decisions, each party normally follows its own interest: i.e. maximizes its own profit. Unfortunately, this results in a suboptimal outcome for the channel as a whole. Independent profit maximization by channel parties leads to a lack of channel coordination with the implication of leaving money on the table. This may well contribute to the notoriously low profitability of sales promotions. This paper first shows analytically why the suboptimality occurs, and then presents an empirical demonstration, using a unique dataset from an Efficient Consumer Response (ECR) project; ECR is a movement in which parties work together to optimize the distribution channel). In this dataset, actual profit is only a small fraction of potential profit, implying that there is a large degree of suboptimality. It is important that (1) channel parties are aware of this suboptimality; and (2) that they have tools to deal with it. Solutions to the channel coordination problem should ensure that the goals of the individual channel parties are aligned with the goals of the channel as a whole. The paper proposes one particular agreement for this purpose, called proportional discount sharing. Application to the ECR data shows a win-win result for both the manufacturer and the retailer. Recognition of the channel coordination problem by the manufacturer and the retailer is the necessary starting point for agreeing on a way of solving it in a win-win fashion.
53 citations
TL;DR: In this paper, the authors study how a manager's short-term interest in the firm's market value may motivate channel stuffing, shipping excess inventory to the downstream channel, which allows a manager to report sales in excess of demand in order to influence investors' valuation of the firm.
Abstract: We study how a manager's short-term interest in the firm's market value may motivate channel stuffing: shipping excess inventory to the downstream channel. Channel stuffing allows a manager to report sales in excess of demand in order to influence investors' valuation of the firm. We apply an inventory model that highlights the potential role of inventory in the manager's channel stuffing and the investors' valuation strategies. Sales in our model are constrained by available inventory. Our model yields a semiseparating and semipooling equilibrium contingent on the initial inventory level: When the demand is lower than a threshold that depends on and is below the initial inventory level, the manager pads sales by a part of the excess inventory and releases the inflated sales report. The investors “correct” the reported sales and are able to infer perfectly the firm's value. When the demand reaches or exceeds this threshold, the manager pads any excess inventory to the sales and reports the initial inventory is sold out, which censors large demand realizations. Then the investors only infer the real demand is no less than the threshold and value the firm accordingly by expectation. Channel stuffing can influence the inventory decision, too. We find both over-and underinvestment in the initial inventory can arise in our model. We discuss empirical and managerial implications of our findings.
This paper was accepted by Paul H. Zipkin, operations and supply chain management.
51 citations
TL;DR: In this article, the authors investigate how the behavior of individual decision makers can affect the performance of a supply chain and find that, unless their incentives are carefully constructed, the agents can strongly distort the system's behavior.
50 citations
TL;DR: In this article, the authors used a corporate code of ethics as a roadmap to create 18 scenarios for assessing business students' ethicality as measured by their behavioral intention using a logistic regression analysis.
Abstract: The author used a corporate code of ethics as a roadmap to create 18 scenarios for assessing business students' ethicality as measured by their behavioral intention. Using a logistic regression analysis, the author also examined 8 factors that could potentially influence students' ethicality. Results indicate 6 scenarios related to 5 areas of the code that deserve special attention and increasing course coverage. These 5 areas of concern are (a) failure to report unethical behavior, (b) improper use of company assets, (c) conflict of interest, (d) inaccurate accounting records by way of channel stuffing (offering a deep discount to customers to overbuy), and (e) trading on inside information. Regression analysis results suggest that female gender, accounting major, full-time work experience, and the number of workplace ethics trainings have a positive influence on students' ethicality. These results should help educators and corporate ethics trainers direct more attention to students or entry-level person...
42 citations
TL;DR: An inventory model is applied that highlights the potential role of inventory in the manager's channel stuffing and the investors' valuation strategies and finds both over-and underinvestment in the initial inventory can arise in the model.
Abstract: We study an extension of a two-period inventory management problem with positively correlated demands in which the manager's compensation is partially based on an external, market-based assessment of the firm's value. As typically the "real'' demand is only observed internally in the firm, the manager may ship more than the real demand to downstream customers and report higher than real sales revenues to influence the external firm valuation, which is known as "channel stuffing." As it is costly and does not reflect the real demand, channel stuffing destroys the firm's value. We identify three factors that drive the manager's incentives for channel stuffing: the marginal effect, the boundary effect and the carryover effect. The marginal effect, analogous to those earnings management incentives revealed in the literature (e.g., Stein 1989), is independent of the inventory problem, while the boundary and carryover effects arise from the nature of the inventory problem. The boundary effect occurs when the real demand realization is high, but, still less than the available inventory: reporting a "sold out" situation censors the upper tail of the demand distribution, and hence, leads to an increase in market valuation that the manager would like to cash in with channel stuffing. The carryover effect occurs when the real demand realization is low. In this scenario, channel stuffing would make the firm's future performance look more rosy because of positively correlated future demand and high future sales margin as the firm will be able to satisfy the future demand from the large current inventory. When examining the initial inventory decision, we find that under rational market valuation, both over- and under-investment may arise in presence of channel stuffing incentives. Based on our model analysis, we derive empirically testable hypotheses for channel stuffing.
36 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2020 | 1 |
| 2019 | 2 |
| 2016 | 1 |
| 2015 | 2 |
| 2014 | 2 |
| 2013 | 3 |