How Supply Chain Complexity Drives Inventory Record Inaccuracy : Empirical Evidence from Cross-border E-commerce

Problem definition: Supply chain complexity from multiple sources inhibits the accuracy of inventory recording that is critical for maintaining and improving operational efficiency. Using a proprietary panel data set comprising inventory, sales, and product attribute information, we explore how supply chain complexity affects inventory record inaccuracy (IRI) in a cross-border e-commerce context. Methodology/Results: We first propose a three-layer framework of supply chain complexity, with (i) internal versus external dimensions in the first layer, (ii) static versus dynamic dimensions in the second layer, and (iii) product versus component dimensions in the third layer. We then specify random-effects models with lagged independent variables to empirically examine the causal relationships between supply chain complexity and IRI. Our results suggest that in e-commerce, external, dynamic, and component complexities dominate their internal, static, and product complexity counterparts in predicting IRI. Through a series of mechanism analyses, we find that (i) external complexity affects IRI mainly through the demand pressure lever, (ii) dynamic complexity influences IRI more significantly through product or core component launches than their phaseouts, and (iii) for component complexity, the variety of core components within a standard production unit (SPU) positively affects IRI, whereas the variety of core components across SPUs negatively affects IRI. Moreover, we find that external complexity not only influences IRI individually, but also strengthens the effect of internal complexity on IRI. Managerial implications: Through our counterfactual analysis, we provide specific guidelines for retailers operating in cross-border e-commerce on how to improve their profit by explicitly accounting for the impact of supply chain complexity on IRI