Report on Inventory Analytics: Lost Revenue Due To Out Of ...

[Pages:29]Report on Inventory Analytics: Reducing Lost Revenue Due To Out Of Stock

Inventory

Igor Ofenbakh Founder, WizData Systems, Inc.

The Challenge

Not enough inventory Too much inventory Product/size mix not optimal

Lost Revenue

Materials copyright WizData Systems, Inc. Proprietary Technology

Problem Definition

A chain of stores sell various products.

Ideally

Real world

There always are the right products in Products can be out of stock (OOS). the right quantities at every store. After that moment a seller has Lost

Sales.

Lost Sales are the potential sales after an item goes OOS that could be made if there were be enough units in stock.

For the seller, the following business questions arise: - What is the amount of sales that were lost? - Is there a better distribution of products

between stores and items?

Materials copyright WizData Systems, Inc. Proprietary Technology

The Benefits

Lost Sales estimation; Size curves tied to local demand; Proper distribution between stores; Increase in sales (4% - 22%); Universal model.

Materials copyright WizData Systems, Inc. Proprietary Technology

Challenges

Materials copyright WizData Systems, Inc. Proprietary Technology

Example 1.

Simple Linear Demand

Sale qt. 8

7 7 6 5 4 3 2 1

One store, one item (25 units in stock)

6 5

Out of Stock

4 3

Sold units Lost sales

2

1

0

Week

1

2

3

4

5

6

7

Materials copyright WizData Systems, Inc. Proprietary Technology

Example 2.

Real World Demand

Sale qt. 9

8

76 6

One store, one item

8 (25 units in stock)

7

Out of Stock

Sold units Lost Sales

5

4

3

2

2

1

2

??

0

Week

1

2

3

4

5

6

7

Materials copyright WizData Systems, Inc. Proprietary Technology

Example 3.

Large quantities. Size proportions

Sale qt. 800

Large blouse

700

680

Small blouse

600

Lost Sales

502

500

400

396 398

400

332

303

300

261

205 200

200 196

206

152

96 100

0

1

2

3

4

5

6

7 Week

Materials copyright WizData Systems, Inc. Proprietary Technology

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