A simulation-based approach for obtaining optimal order quantities of short-expiration date items at a retail store

Authors:
Haixia Sang;Soemon Takakuwa
Affiliations:
Nagoya University, Aichi, Japan;Nagoya University, Aichi, Japan
Venue:
Proceedings of the Winter Simulation Conference
Year:
2012

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Abstract

The uncertain demand of expiration-dated item often leads to scrap losses or opportunity losses, which result in resource wasting and the degradation of customer satisfaction. In this paper, a well known exponential smoothing method was modified to forecast the hourly demand of rice balls, by utilizing the concept of the newsvendor problem, and a simulation model was constructed to simulate the scrap loss and opportunity loss changes. The optimal order quantity's characteristics, which can maximize the retailer's expected profit, were clarified by using OptQuest and sensitivity analysis. The proposed approach was applied to a real store to confirm its effectiveness.