Management of Stock Surplus
Authors
Abstract
Large companies retail business is characterized by offering a wide range ofproducts in their stores, usually located either in a country or throughout
several countries. In the particular case of Sonae Distribui¸c˜ao, the stores
offer products ranging from basic food to textiles or mobile telecommunication
devices. This company engages in a policy of aggressive pricing, based
on varied and intense promotional activity. The daily requirement for submission
of products to its customers can, in some cases, cause a surplus of
stock which must be treated properly at each store. Since there’s a large
number of stores covering all the country, and a huge number of products in
each of the possible classes of items, the problem of deciding how to handle
the stock surplus has great economic impact. Within this problem we can
identify two levels of related decisions to be taken. The first level relates to
the decision whether to collect or not surplus stocks from each one of the
stores. In a second level, it is necessary to decide what to do with those
stocks in view of the outcome decision at the first level has been taken. If
the stock surplus items are left in the store the decisions are shrinkage, clearance
sale or donation. In this case the decision can be easily taken by the
company decision makers. If the items are collected the decision options are
return the items to the suppliers (incurring in the preparation and shipping
expenses) or send them to the warehouse (incurring in transportation and
holding costs).
Here we consider a simplified version of this highly complex problem.
Given the surplus stock at each store of each item the problem is to decide
which items to collect. A set of items shall be collected if its final revenue
pays-off the preparation and transportation costs. This is a classical optimization
problem for which several algorithms have been tested during more
than two decades. We present a possible model for this problem