IDEAS home Printed from https://ideas.repec.org/a/spr/orspec/v40y2018i4d10.1007_s00291-018-0511-9.html
   My bibliography  Save this article

Data-driven retail inventory management with backroom effect

Author

Listed:
  • Özgün Turgut

    (Technische Universität München, School of Management)

  • Florian Taube

    (Technische Universität München, School of Management)

  • Stefan Minner

    (Technische Universität München, School of Management)

Abstract

The backroom effect (BRE) constitutes the handling effort of a replenishment that does not fit on the shelf of a retailer. This effect needs to be included in the decision making of inventory policy parameters as it influences the handling effort, which constitutes a major part of the retailer’s operational cost. We propose a mixed integer linear program to calculate the parameters of a periodic review (s, c, S, nq) policy while considering the BRE. The (s, c, S, nq) policy triggers an order when inventory drops below the reorder point s. Also, an order is triggered whenever the inventory drops below the can-order point c, provided at least one other product’s inventory level is below s and thus ordered. The order then comprises the smallest integer number n of case packs with size q that brings the inventory level to or above S. As retailers face stochastic non-stationary demand, a data-driven approach based on historical data is applied to this joint replenishment problem. The numerical study shows that including the BRE into the optimization can lead to cost savings with a median of 0.96% compared to neglecting its effects. Considering the stochasticity in the decision making, cost improvements with a median of 53.23% have been realized against an approach that only considers average daily demands and a safety stock. The advantage of an (s, c, S, nq) order policy over an (s, S, nq) policy is shown by median savings of 17.99%.

Suggested Citation

  • Özgün Turgut & Florian Taube & Stefan Minner, 2018. "Data-driven retail inventory management with backroom effect," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(4), pages 945-968, October.
  • Handle: RePEc:spr:orspec:v:40:y:2018:i:4:d:10.1007_s00291-018-0511-9
    DOI: 10.1007/s00291-018-0511-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00291-018-0511-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s00291-018-0511-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ehrenthal, J.C.F. & Honhon, D. & Van Woensel, T., 2014. "Demand seasonality in retail inventory management," European Journal of Operational Research, Elsevier, vol. 238(2), pages 527-539.
    2. Broekmeulen, Rob A.C.M. & Sternbeck, Michael G. & van Donselaar, Karel H. & Kuhn, Heinrich, 2017. "Decision support for selecting the optimal product unpacking location in a retail supply chain," European Journal of Operational Research, Elsevier, vol. 259(1), pages 84-99.
    3. Karel H. van Donselaar & Vishal Gaur & Tom van Woensel & Rob A. C. M. Broekmeulen & Jan C. Fransoo, 2010. "Ordering Behavior in Retail Stores and Implications for Automated Replenishment," Management Science, INFORMS, vol. 56(5), pages 766-784, May.
    4. S G Johansen & P Melchiors, 2003. "Can-order policy for the periodic-review joint replenishment problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(3), pages 283-290, March.
    5. Khouja, Moutaz & Goyal, Suresh, 2008. "A review of the joint replenishment problem literature: 1989-2005," European Journal of Operational Research, Elsevier, vol. 186(1), pages 1-16, April.
    6. Kouki, Chaaben & Babai, M. Zied & Jemai, Zied & Minner, Stefan, 2016. "A coordinated multi-item inventory system for perishables with random lifetime," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 226-237.
    7. Dimitris Bertsimas & Aurélie Thiele, 2006. "A Robust Optimization Approach to Inventory Theory," Operations Research, INFORMS, vol. 54(1), pages 150-168, February.
    8. van Donselaar, Karel H. & Broekmeulen, Rob A.C.M., 2013. "Determination of safety stocks in a lost sales inventory system with periodic review, positive lead-time, lot-sizing and a target fill rate," International Journal of Production Economics, Elsevier, vol. 143(2), pages 440-448.
    9. James H. Bookbinder & Jin-Yan Tan, 1988. "Strategies for the Probabilistic Lot-Sizing Problem with Service-Level Constraints," Management Science, INFORMS, vol. 34(9), pages 1096-1108, September.
    10. Beutel, Anna-Lena & Minner, Stefan, 2012. "Safety stock planning under causal demand forecasting," International Journal of Production Economics, Elsevier, vol. 140(2), pages 637-645.
    11. Bijvank, Marco & Vis, Iris F.A., 2011. "Lost-sales inventory theory: A review," European Journal of Operational Research, Elsevier, vol. 215(1), pages 1-13, November.
    12. Martel, Alain & Diaby, Moustapha & Boctor, Fayez, 1995. "Multiple items procurement under stochastic nonstationary demands," European Journal of Operational Research, Elsevier, vol. 87(1), pages 74-92, November.
    13. Woonghee Tim Huh & Retsef Levi & Paat Rusmevichientong & James B. Orlin, 2011. "Adaptive Data-Driven Inventory Control with Censored Demand Based on Kaplan-Meier Estimator," Operations Research, INFORMS, vol. 59(4), pages 929-941, August.
    14. Zümbül Atan & Nesim Erkip, 2015. "Note on “The Backroom Effect in Retail Operations”," Production and Operations Management, Production and Operations Management Society, vol. 24(11), pages 1833-1834, November.
    15. van Donselaar, K. & van Woensel, T. & Broekmeulen, R. & Fransoo, J., 2006. "Inventory control of perishables in supermarkets," International Journal of Production Economics, Elsevier, vol. 104(2), pages 462-472, December.
    16. A Curşeu & T van Woensel & J Fransoo & K van Donselaar & R Broekmeulen, 2009. "Modelling handling operations in grocery retail stores: an empirical analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(2), pages 200-214, February.
    17. Bertsimas, Dimitris & Doan, Xuan Vinh, 2010. "Robust and data-driven approaches to call centers," European Journal of Operational Research, Elsevier, vol. 207(2), pages 1072-1085, December.
    18. Sachs, Anna-Lena & Minner, Stefan, 2014. "The data-driven newsvendor with censored demand observations," International Journal of Production Economics, Elsevier, vol. 149(C), pages 28-36.
    19. Haolin Feng & Qi Wu & Kumar Muthuraman & Vinayak Deshpande, 2015. "Replenishment Policies for Multi-Product Stochastic Inventory Systems with Correlated Demand and Joint-Replenishment Costs," Production and Operations Management, Production and Operations Management Society, vol. 24(4), pages 647-664, April.
    20. Z Hua & J Yang & F Huang & X Xu, 2009. "A static-dynamic strategy for spare part inventory systems with nonstationary stochastic demand," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(9), pages 1254-1263, September.
    21. Sternbeck, Michael G. & Kuhn, Heinrich, 2014. "An integrative approach to determine store delivery patterns in grocery retailing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 205-224.
    22. van Zelst, Susan & van Donselaar, Karel & van Woensel, Tom & Broekmeulen, Rob & Fransoo, Jan, 2009. "Logistics drivers for shelf stacking in grocery retail stores: Potential for efficiency improvement," International Journal of Production Economics, Elsevier, vol. 121(2), pages 620-632, October.
    23. Tsai, Chieh-Yuan & Tsai, Chi-Yang & Huang, Po-Wen, 2009. "An association clustering algorithm for can-order policies in the joint replenishment problem," International Journal of Production Economics, Elsevier, vol. 117(1), pages 30-41, January.
    24. Goyal, Suresh K. & Satir, Ahmet T., 1989. "Joint replenishment inventory control: Deterministic and stochastic models," European Journal of Operational Research, Elsevier, vol. 38(1), pages 2-13, January.
    25. Ananth V. Iyer & Linus E. Schrage, 1992. "Analysis of the Deterministic (s, S) Inventory Problem," Management Science, INFORMS, vol. 38(9), pages 1299-1313, September.
    26. Holzapfel, Andreas & Hübner, Alexander & Kuhn, Heinrich & Sternbeck, Michael G., 2016. "Delivery pattern and transportation planning in grocery retailing," European Journal of Operational Research, Elsevier, vol. 252(1), pages 54-68.
    27. Vishal Gaur & Marshall L. Fisher, 2004. "A Periodic Inventory Routing Problem at a Supermarket Chain," Operations Research, INFORMS, vol. 52(6), pages 813-822, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barros, Júlio & Cortez, Paulo & Carvalho, M. Sameiro, 2021. "A systematic literature review about dimensioning safety stock under uncertainties and risks in the procurement process," Operations Research Perspectives, Elsevier, vol. 8(C).
    2. Madison J. Bixler & Dorothée Honhon, 2021. "Exploring the Connections between Backrooms, Inventory Record Inaccuracies, and Waste," Sustainability, MDPI, vol. 13(17), pages 1-12, August.
    3. Erkip, Nesim Kohen, 2023. "Can accessing much data reshape the theory? Inventory theory under the challenge of data-driven systems," European Journal of Operational Research, Elsevier, vol. 308(3), pages 949-959.
    4. Weiwei Li & Lisheng Weng & Kaixu Zhao & Sidong Zhao & Ping Zhang, 2021. "Research on the Evaluation of Real Estate Inventory Management in China," Land, MDPI, vol. 10(12), pages 1-29, November.
    5. Alexander Hübner & Pedro Amorim & Heinrich Kuhn & Stefan Minner & Tom Woensel, 2018. "Retail operations," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(4), pages 831-835, October.
    6. Huber, Jakob & Stuckenschmidt, Heiner, 2021. "Intraday shelf replenishment decision support for perishable goods," International Journal of Production Economics, Elsevier, vol. 231(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    2. Frank, Markus & Ostermeier, Manuel & Holzapfel, Andreas & Hübner, Alexander & Kuhn, Heinrich, 2021. "Optimizing routing and delivery patterns with multi-compartment vehicles," European Journal of Operational Research, Elsevier, vol. 293(2), pages 495-510.
    3. Huber, Jakob & Stuckenschmidt, Heiner, 2021. "Intraday shelf replenishment decision support for perishable goods," International Journal of Production Economics, Elsevier, vol. 231(C).
    4. Lagorio, Alexandra & Pinto, Roberto, 2021. "Food and grocery retail logistics issues: A systematic literature review," Research in Transportation Economics, Elsevier, vol. 87(C).
    5. Alexander Hübner & Kai Schaal, 2017. "Effect of replenishment and backroom on retail shelf-space planning," Business Research, Springer;German Academic Association for Business Research, vol. 10(1), pages 123-156, June.
    6. Erkip, Nesim Kohen, 2023. "Can accessing much data reshape the theory? Inventory theory under the challenge of data-driven systems," European Journal of Operational Research, Elsevier, vol. 308(3), pages 949-959.
    7. Thomas Wensing & Michael G. Sternbeck & Heinrich Kuhn, 2018. "Optimizing case-pack sizes in the bricks-and-mortar retail trade," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(4), pages 913-944, October.
    8. Hübner, Alexander & Schaal, Kai, 2017. "A shelf-space optimization model when demand is stochastic and space-elastic," Omega, Elsevier, vol. 68(C), pages 139-154.
    9. Ehrenthal, J.C.F. & Honhon, D. & Van Woensel, T., 2014. "Demand seasonality in retail inventory management," European Journal of Operational Research, Elsevier, vol. 238(2), pages 527-539.
    10. Holzapfel, Andreas & Hübner, Alexander & Kuhn, Heinrich & Sternbeck, Michael G., 2016. "Delivery pattern and transportation planning in grocery retailing," European Journal of Operational Research, Elsevier, vol. 252(1), pages 54-68.
    11. Stefanny Ramirez & Laurence H. Brandenburg & Dario Bauso, 2023. "Coordinated Replenishment Game and Learning Under Time Dependency and Uncertainty of the Parameters," Dynamic Games and Applications, Springer, vol. 13(1), pages 326-352, March.
    12. Serrano, Breno & Minner, Stefan & Schiffer, Maximilian & Vidal, Thibaut, 2024. "Bilevel optimization for feature selection in the data-driven newsvendor problem," European Journal of Operational Research, Elsevier, vol. 315(2), pages 703-714.
    13. Jiseong Noh & Jong Soo Kim & Seung-June Hwang, 2020. "A Multi-Item Replenishment Problem with Carbon Cap-and-Trade under Uncertainty," Sustainability, MDPI, vol. 12(12), pages 1-15, June.
    14. Bo Dai & Fenfen Li, 2021. "Joint Inventory Replenishment Planning of an E-Commerce Distribution System with Distribution Centers at Producers’ Locations," Logistics, MDPI, vol. 5(3), pages 1-14, July.
    15. Sara Martins & Pedro Amorim & Bernardo Almada-Lobo, 2018. "Delivery mode planning for distribution to brick-and-mortar retail stores: discussion and literature review," Flexible Services and Manufacturing Journal, Springer, vol. 30(4), pages 785-812, December.
    16. Bouchery, Yann & Ghaffari, Asma & Jemai, Zied & Tan, Tarkan, 2017. "Impact of coordination on costs and carbon emissions for a two-echelon serial economic order quantity problem," European Journal of Operational Research, Elsevier, vol. 260(2), pages 520-533.
    17. Broekmeulen, Rob A.C.M. & Sternbeck, Michael G. & van Donselaar, Karel H. & Kuhn, Heinrich, 2017. "Decision support for selecting the optimal product unpacking location in a retail supply chain," European Journal of Operational Research, Elsevier, vol. 259(1), pages 84-99.
    18. Dai, Bo & Chen, Haoxun & Li, Yuan & Zhang, Yidong & Wang, Xiaoqing & Deng, Yuming, 2023. "An alternating direction method of multipliers for optimizing (s, S) policies in a distribution system with joint replenishment volume constraints," Omega, Elsevier, vol. 116(C).
    19. Fildes, Robert & Ma, Shaohui & Kolassa, Stephan, 2022. "Retail forecasting: Research and practice," International Journal of Forecasting, Elsevier, vol. 38(4), pages 1283-1318.
    20. Calzavara, Martina & Finco, Serena & Persona, Alessandro & Zennaro, Ilenia, 2023. "A cost-based tool for the comparison of different e-grocery supply chain strategies," International Journal of Production Economics, Elsevier, vol. 262(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:orspec:v:40:y:2018:i:4:d:10.1007_s00291-018-0511-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.