Comparing Lot Sizing Techniques for Unstable Demand Inventory of a Hardware Retailer

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Sunitiya Thuannadee Thunyaporn Lekdee Marisa Sarajan Wanvisa Kaensanthia Wanwimon Phracharoen


The objective of this research is to compare the inventory costs with the actual ones in a hardware retailer using the optimum Wagner-Whitin algorithm and heuristic methods. The selected heuristic methods for this study are Part-Period Balancing, Silver-Meal Heuristic, and Least Unit Cost. Class A products purchased from three major vendors were chosen for this study and single-item ordering was assumed. The weekly demand from July to December 2017 was used as the input. Also, the retailer’s actual inventory costs during this period were determined to compare with the inventory costs using selected lot sizing techniques. The coefficient of variation of each item was greater than 0.20 demonstrating the fluctuating demand. The results showed that the heuristic methods had lower inventory costs than the actual costs for every item in the study. The average cost penalty using the heuristic methods instead of the optimal Wagner-Whitin algorithm was less than 8%. The overall average inventory cost of Silver-Meal method was the least among the heuristic methods. The difference of the average costs among heuristic methods did not exceed 3%.


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