Companies competing in today’s retail marketplace face competing demands to launch innovative products and improve customer service levels while keeping out-of-stock products low and reduced supply chain (SC) costs. The deleterious effects of OOS in profits and market share in retail chains are amply documented.
Low forecast accuracy coupled with high variability in demand prompt companies often to compensate with expensive operational remedies such as transhipment between distribution centres at expedite transportation costs, therefore maintaining high service levels at the expenses of shrinking profit margins. Balancing inventory and transportation costs is at the heart of inventory routing. Inventory in accuracy contributes to amplify these harmful effects. Even small losses in inventory accuracy might result in large stock-outs. Customers facing OOS products tend to switch package size, product item, purchase store, or even to postpone or cancel purchases altogether. To manage the volatility in demand effectively, companies in different industries.