Demand seasonality in retail inventory management

Ehrenthal, Joachim; Honhon, D.; Van Woensel, T.

doi:10.1016/j.ejor.2014.03.030

Publication type:	Article in scientific journal
Type of review:	Peer review (publication)
Title:	Demand seasonality in retail inventory management
Authors:	Ehrenthal, Joachim Honhon, D. Van Woensel, T.
et. al:	No
DOI:	10.1016/j.ejor.2014.03.030
Published in:	European Journal of Operational Research
Volume(Issue):	238
Issue:	2
Page(s):	527
Pages to:	539
Issue Date:	16-Oct-2014
Publisher / Ed. Institution:	Elsevier
ISSN:	0377-2217 1872-6860
Language:	English
Subjects:	Retailing; Inventory control; Lost sale; Non-stationary demand; Seasonality
Subject (DDC):	658: General Management
Abstract:	We investigate the value of accounting for demand seasonality in inventory control. Our problem is motivated by discussions with retailers who admitted to not taking perceived seasonality patterns into account in their replenishment systems. We consider a single-location, single-item periodic review lost sales inventory problem with seasonal demand in a retail environment. Customer demand has seasonality with a known season length, the lead time is shorter than the review period and orders are placed as multiples of a fixed batch size. The cost structure comprises of a fixed cost per order, a cost per batch, and a unit variable cost to model retail handling costs. We consider four different settings which differ in the degree of demand seasonality that is incorporated in the model: with or without within-review period variations and with or without across-review periods variations. In each case, we calculate the policy which minimizes the long-run average cost and compute the optimality gaps of the policies which ignore part or all demand seasonality. We find that not accounting for demand seasonality can lead to substantial optimality gaps, yet incorporating only some form of demand seasonality does not always lead to cost savings. We apply the problem to a real life setting, using Point-of-Sales data from a European retailer. We show that a simple distinction between weekday and weekend sales can lead to major cost reductions without greatly increasing the complexity of the retailer’s automatic store ordering system. Our analysis provides valuable insights on the trade-off between the complexity of the automatic store ordering system and the benefits of incorporating demand seasonality.
URI:	https://digitalcollection.zhaw.ch/handle/11475/17764
Fulltext version:	Published version
License (according to publishing contract):	Licence according to publishing contract
Departement:	School of Management and Law
Appears in collections:	Publikationen School of Management and Law

Files in This Item:

There are no files associated with this item.

Show full item record

Ehrenthal, J., Honhon, D., & Van Woensel, T. (2014). Demand seasonality in retail inventory management. European Journal of Operational Research, 238(2), 527–539. https://doi.org/10.1016/j.ejor.2014.03.030

Ehrenthal, J., Honhon, D. and Van Woensel, T. (2014) ‘Demand seasonality in retail inventory management’, European Journal of Operational Research, 238(2), pp. 527–539. Available at: https://doi.org/10.1016/j.ejor.2014.03.030.

J. Ehrenthal, D. Honhon, and T. Van Woensel, “Demand seasonality in retail inventory management,” European Journal of Operational Research, vol. 238, no. 2, pp. 527–539, Oct. 2014, doi: 10.1016/j.ejor.2014.03.030.

EHRENTHAL, Joachim, D. HONHON und T. VAN WOENSEL, 2014. Demand seasonality in retail inventory management. European Journal of Operational Research. 16 Oktober 2014. Bd. 238, Nr. 2, S. 527–539. DOI 10.1016/j.ejor.2014.03.030

Ehrenthal, Joachim, D. Honhon, and T. Van Woensel. 2014. “Demand Seasonality in Retail Inventory Management.” European Journal of Operational Research 238 (2): 527–39. https://doi.org/10.1016/j.ejor.2014.03.030.

Ehrenthal, Joachim, et al. “Demand Seasonality in Retail Inventory Management.” European Journal of Operational Research, vol. 238, no. 2, Oct. 2014, pp. 527–39, https://doi.org/10.1016/j.ejor.2014.03.030.