A marketing simulation of a retail store with the consumer reactions to Outof- shelf based on a POS data

Abstract

Controlling the trade-off between the costs of disposal and losses of stock shortage have been one of the big management issue in retail stores, especially in convenient stores dealing many products of short expiration date. In this study, we aimed to evaluate the maximum gross profit and to analyze transition of waste costs and losses of purchasing opportunities in a retail store. We have developed a model of a retail store which performs simple three types of demand estimation and three types of ordering, and also created a model of customers which reflects consumer reactions to out-of-shelf situations such as brand switches and cancel purchasing by using actual Pointof- Sales and stock data. As a result of experiments by agent-based simulation, we obtained the order quantity to maximize the gross profit when the retail store made quantitative ordering. Moreover, we found that providing thresholds in minimum order amount increased gross profit and reduced losses of shortage. Finally, the combination of the demand estimation by using exponential smoothing and the threshold ordering made better performance than any other method.