A method for estimating stock-out-based substitution rates by using point-of-sale data

A method for estimating stock-out-based substitution rates by using point-of-sale data

0.00 Avg rating0 Votes
Article ID: iaor20105519
Volume: 41
Issue: 5
Start Page Number: 408
End Page Number: 420
Publication Date: May 2009
Journal: IIE Transactions
Authors: , ,
Keywords: point of sale
Abstract:

Empirical studies in retailing suggest that stock-out rates are quite high in many product categories. Stock-outs result in demand spillover, or substitution, among items within a product category. Product assortment and inventory management decisions can be improved when the substitution rates are known. In this paper, a method is presented to estimate product substitution rates by using only Point-Of-Sale (POS) data. The approach clusters POS intervals into states where each state corresponds to a specific substitution scenario. Then available POS data for each state is consolidated and the substitution rates are estimated using the consolidated information. An extensive computational analysis of the proposed substitution rate estimation method is provided. The computational analysis and comparisons with an estimation method from the literature show that the proposed estimation method performs satisfactorily with limited information.

Reviews

Required fields are marked *. Your email address will not be published.