Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
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Optimal Multi-Product Inventory Problem Algorithm with Target In-Stock Ratio Constraints

목표 재고보유매장비율 달성을 위한 다중품목 재고수준 최적화 알고리즘

  • Hyoungtae Kim (Corporate Management Major, Department of Convergence Management, Woosong University)
  • 김형태 (우송대학교 융합경영학부 경영학전공)
  • Received : 2023.05.30
  • Accepted : 2023.06.19
  • Published : 2023.06.30
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Abstract

This paper studied the problem of determining the optimal inventory level to meet the customer service target level in a situation where the customer demand for each branch of a nationwide retailer is uncertain. To this end, ISR (In-Stock Ratio) was defined as a key management indicator (KPI) that can be used from the perspective of a nationwide retailer such as Samsung, LG, or Apple that sells goods at branches nationwide. An optimization model was established to allow the retailer to minimize the total amount of inventory held at each branch while meeting the customer service target level defined as the average ISR. This paper proves that there is always an optimal solution in the model and expresses the optimal solution in a generalized form using the Karush-Kuhn-Tucker condition regardless of the shape of the probability distribution of customer demand. In addition, this paper studied the case where customer demand follows a specific probability distribution such as a normal distribution, and an expression representing the optimal inventory level for this case was derived.

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Acknowledgement

This study has been partially supported by a Research Fund of Woosong University, Korea.

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