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Improving retailers' service level: incorporating the order line size distribution and preventing unsellable stock levels

Veldhuizen, Johan Matthijs (2017) Improving retailers' service level: incorporating the order line size distribution and preventing unsellable stock levels.

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Abstract:This research project has been carried out at the University of Twente, in cooperation with Slimstock, the European market leader in inventory optimization. Currently, there is a considerable potential of keeping useless inventory which will hardly deplete, as the probability of a customer wanting this amount - e.g. three mugs - is very low. These different order line sizes are not accounted for in the standard (R,s,nQ) inventory model we research. This leads to the frequent occurrence of “left-over" inventory being above the reorder level, at which a replenishment order is triggered. Currently (assuming lost sales) in our own model, 75.68\% of the multi-modal SKU do not meet their target fill rate on shop-level, versus 63.58\% of the other type of SKUs. The compound Poisson method performs best for multi-modal order line size SKUs, as with this method the average volume fill rate increases with 8.31\%-point, against 47.12\% more stock on hand, resulting in 84.79\% of the SKUs meeting their target fill rate. The ``Add undershoot"-method performs best for unimodal order line size SKUs, as the average volume fill rate increases with 1.98\%-point, against 13.16\% more stock on hand, resulting in 71.97\% of the SKUs meeting their target fill rate.
Item Type:Essay (Master)
Clients:
Slimstock, Deventer, the Netherlands
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/72356
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