An examination of the size of orders from customers, their characterisation and the implications for inventory control of slow moving items

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 a...

Full description

Saved in:
Bibliographic Details
Published in:The Journal of the Operational Research Society 2003-08, Vol.54 (8), p.833-837
Main Authors: Johnston, F R, Boylan, J E, Shale, E A
Format: Article
Language:English
Subjects:
Applied sciences
Business and Management
Business orders
Business structures
Case-Oriented Paper
Case-Oriented Papers
Customer services
Customers
distribution
Exact sciences and technology
forecasting
Inventory
Inventory control
Inventory management
Management
Normal distribution
Operational research and scientific management
Operational research. Management science
Operations research
Operations Research/Decision Theory
order size
Sales
Scheduling, sequencing
Shales
Standard deviation
Statistical variance
statistics
Stock sales
Studies
Suppliers
Wholesale trade
Wholesalers
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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.
ISSN:0160-5682
1476-9360
DOI:10.1057/palgrave.jors.2601586