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Reducing Waste in Retail: A Mixed Strategy, Cost Optimization Model for Sustainable Dead Stock Management

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  • Richard Li

    (Department of Industrial and Systems Engineering, De La Salle University, Manila 1004, Philippines)

  • Rosemary Seva

    (Department of Industrial and Systems Engineering, De La Salle University, Manila 1004, Philippines)

  • Anthony Chiu

    (Department of Industrial and Systems Engineering, De La Salle University, Manila 1004, Philippines)

Abstract

The retail sector is the most demand-sensitive echelon in the supply chain, where non-moving items accumulate and become dead stock. Existing inventory management studies focus on fast-moving products and income generation. This paper focuses on dead stock management and proposes a mixed strategy solution using a pure integer non-linear programming model that minimizes the dead stock management cost of a retail chain operator. The number of products and volume of product-related data in a retail chain system require big data analysis to ensure sustainable inventory practices that reduce waste generated from dead stock inventory. Through hypothetical data sets, the 3-store, 10-product run showed that discount percentage, expected sales success probability of a product in a store location, and disposition of unsold products were the main drivers of the decisions made by the model. The most significant cost contributors arising from these decisions were the unrecovered product cost (UPC), disposed product cost (PC), and salvage value from the successful sale of dead stock. Inventory managers must balance the effect on these cost components when they choose the strategies to use in managing dead stock.

Suggested Citation

  • Richard Li & Rosemary Seva & Anthony Chiu, 2025. "Reducing Waste in Retail: A Mixed Strategy, Cost Optimization Model for Sustainable Dead Stock Management," Sustainability, MDPI, vol. 17(20), pages 1-45, October.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:20:p:9242-:d:1774105
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    References listed on IDEAS

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    4. Houmin Yan & Candace Arai Yano & Hanqin Zhang, 2019. "Inventory Management under Periodic Profit Targets," Production and Operations Management, Production and Operations Management Society, vol. 28(6), pages 1387-1406, June.
    5. Naderi, Siamak & Kilic, Kemal & Dasci, Abdullah, 2020. "A deterministic model for the transshipment problem of a fast fashion retailer under capacity constraints," International Journal of Production Economics, Elsevier, vol. 227(C).
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