Automatic Replenishment Programs and Level of Involvement: Performance Implications

In Today's increasingly complex business environment, many firms are working more closely and sharing greater information with trading partners. The utilization of automatic replenishment programs (ARPs) for inventory management represents an example of how firms are cooperating to improve overall efficiency and service. However, ARP is still a relatively new phenomenon, and ARP‐related benefits cannot be realized without changes to working practices that require considerable time and financial commitment. Whether such commitments are warranted has yet to be established. Little empirical work is available detailing ARP performance to date. This research examines the implementation of ARP components, firms' effectiveness at achieving ARP‐related goals and associations between firms' level of involvement with ARP and ARP‐related performance. Findings suggest that more extensive involvement with ARP is beneficial. Firms that handle a larger proportion of their sales volume with ARPs reported greater success in terms of profitability and trading partner relationships.