Optimal Stocking Of Retail Outlets: The Case Of Weekly Demand Pattern

Retail stores sell products to consumers. Their ability to sell depends upon the availability of the planned assortment, i.e. every item is on shelf so that the consumer can buy it. In particular, for fast moving consumer goods, like food, the consumer expects that each item is on stock. The retailer's decisions on the length of replenishment cycles of stores, on the shelf-capacity allocated to each item, on the amount of inventory stored in the backroom of the store, on the minimum order quantity of each item, or on the case size affect the fill rate of the store. This paper identifies a new aspect: With a demand fluctuating regularly according to a weekly pattern, the decision on which day to review inventory and to deliver stock has impact on the service level of the store. It analyzes the effect of the position of ordering cycles with respect to demand cycles on the out-of-stock rate. We simulate a retail scenario with different replenishment cycles, i.e. supermarkets with weekly seasonal demandccan be supplied at different days of the week. We show -based on actual sales data of supermarkets– that the fillrate depends heavily on the interaction between the weekly demand pattern and the inventory review and replenishment cycle. Futhermore, we demonstrate the role of item's case size in the performance of the supply chain. Numerical results for a periodic review, order-up-to-level inventory control system with batch-ordering and time-varying demand are presented.