Working Paper: CEPR ID: DP10225
Authors: Suresh De Mel; Dammika Herath; David McKenzie; Yuvraj Pathak
Abstract: Accurate measurement of stock levels, turnover, and profitability in microenterprises in developing countries is difficult due to the fact that the majority of these firms do not keep detailed records. We test the use of RFID tags as a means of objectively measuring stock levels and stock flow in small retail firms in Sri Lanka. In principle this offers the potential to track stock movements accurately. We compare the stock counts obtained from RFID reads to physical stock counts and to survey responses. We have three main findings. First, current RFID-technology is more difficult to use, and more time-consuming to employ, than we envisaged. Second, the technology works reasonably well for paper products, but very poorly for most products sold by microenterprises: on average we were able to read only about one-quarter of the products tagged, and there was considerable day-to-day variation in read-efficiency. Third, a comparison of survey responses and physical stock-takes shows much higher accuracy for survey measures. As a result, we conclude that this technology is currently unsuitable for improving stock measurement in microenterprises, except perhaps for a few products.
Keywords: microenterprises; profit and sales measurement; RFID; survey methods
JEL Codes: C81; C93; M41; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| complexity of the technology (O33) | operational efficiency (D61) |
| operational hurdles (L15) | effectiveness of RFID technology in measuring stock levels (L81) |
| product type (L68) | effectiveness of RFID technology (L96) |
| survey measures of stock levels (C83) | accuracy of inventory measurement (C43) |
| survey results (C83) | physical stock counts (C80) |