Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - An examination of the size of orders from customers, their characterisation and the implications for inventory control of slow moving items
AU - Johnston, F. R.
AU - Boylan, John
AU - Shale, E. A.
PY - 2003/8/1
Y1 - 2003/8/1
N2 - This paper examines half a million observations of the size of orders from customers at an electrical wholesaler. It notes: the distribution of the size of customer orders for a single item (stock keeping unit or SKU) is very skewed and resembles a geometric distribution; while the average size of an order is different for different items, for one SKU the mean order size is effectively the same at different branches even when the branches have very different demand rates; across a range of SKUs there is a strong relationship linking the mean and the variance of order size. The general results above are shown to apply to even the slowest movers. This extension is important because for items with intermittent demand the size of customer orders is required to produce an unbiased estimate of demand. Also a knowledge of the distribution of demand is important for setting maximum and minimum stock levels and the scheme employed is described.
AB - This paper examines half a million observations of the size of orders from customers at an electrical wholesaler. It notes: the distribution of the size of customer orders for a single item (stock keeping unit or SKU) is very skewed and resembles a geometric distribution; while the average size of an order is different for different items, for one SKU the mean order size is effectively the same at different branches even when the branches have very different demand rates; across a range of SKUs there is a strong relationship linking the mean and the variance of order size. The general results above are shown to apply to even the slowest movers. This extension is important because for items with intermittent demand the size of customer orders is required to produce an unbiased estimate of demand. Also a knowledge of the distribution of demand is important for setting maximum and minimum stock levels and the scheme employed is described.
KW - inventory control
KW - forecasting
KW - distribution
KW - statistics
KW - order size
U2 - 10.1057/palgrave.jors.2601586
DO - 10.1057/palgrave.jors.2601586
M3 - Journal article
VL - 54
SP - 833
EP - 837
JO - Journal of the Operational Research Society
JF - Journal of the Operational Research Society
SN - 0160-5682
IS - 8
ER -