Use of Inventory Management for Large General Retailers
Open Access
- Author:
- Lucas, Patrick Thomas
- Area of Honors:
- Industrial Engineering
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Dr. Arunachalam Ravindran, Thesis Supervisor
Dr. Paul M Griffin, Thesis Honors Advisor - Keywords:
- Industrial Engineering
Inventory
Retail - Abstract:
- Controlling operating costs is critical in the current competitive landscape of national general item retail chains. Though there are many expenses that fall into the operating budget, inventory control is a major portion of this expense at many large retailers. Having an efficient inventory management policy can provide a strong foundation as many retailers transition to point of sale (POS), radio frequency identification (RFID) and other new technologies to track inventory. Using recent sales data from a major national retailer, this thesis will apply inventory management theory to construct and evaluate an inventory model for this retail setting. An ABC classification system is used to categorize each Stock Keeping Unit (SKU) based on unit holding cost. The optimal policy is determined to be a base stock system with normally distributed demand. A cost model that calculates the inventory holding cost and shortage cost is optimized to find the optimal order-up-to quantity for each item. This policy is then evaluated through a sensitivity analysis to help understand the major decision factors in the model. The findings indicate that the model will effectively determine the optimal order-up-to quantity and service level for a base stock inventory policy based on the estimated holding cost and shortage cost.