Retail Inventory Movement — A Case Study in Rationalisation

A great deal of the work in the area of stock management is devoted to identifying optimum values for parameters such as order size, order frequency, safety stock, etc. This is particularly appropriate in manufacturing where a company's stock of raw materials is usually held in one place. As we move towards the retailing sector, however, there may be several points ( warehouses and shops ) at which inventories can be held. The problem then becomes one of moving available stock around the various alternative locations so as to maximise sales or minimise the likelihood of stock‐out. The emphasis has changed from a static situation of ordering to a dynamic one of stock movement. In this paper we describe a common retailing problem, particularly in fashion markets, of stock transfers between a given set of branches. Stock is required in those outlets where demand is likely to be high, but the number of physical transfers in a given time period must be within the capabilities of the available transport facilities. A simple model of forecasting and allocation is described which, for the company involved, resulted in reduced stock movement and provided satisfactory stock levels.