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Measuring the effectiveness of allocation algorithms by means of simulation modelling

Thom, Elmien (2016-03)

Thesis (MComm)—Stellenbosch University, 2016.


ENGLISH ABSTRACT: The allocation of stock to stores is one of the most important processes in the management of a retail chain. In the clothing industry, allocation decisions include, amongst other, the determination of the number of each size (for example small, medium and large) to send to each store. A case study of this problem in Pep Stores Ltd. (PEP), a major retailer in South Africa, is considered. In PEP, products are ordered from factories about seven months before they are available in the stores. They are then shipped to the distribution centra, after which they are distributed per road to the stores. Before the products are ordered, preliminary allocation decisions are made. Once the stock arrives at the distribution centra, decisions about the allocation of products and sizes to the stores are nalised. Allocation decisions are adjusted throughout the season as more recent sales data become available. In this thesis, simulation models are developed to compare four allocation methods in terms of total expected sales, shortages and surpluses. The algorithms include PEP's current algorithm, an existing algorithm that minimises the expected number of weeks that shortages and surpluses occur at stores, a new algorithm with the objective to maximise expected sales, and a relaxation of the new algorithm. The simulation models are developed according to two modelling approaches. Each approach is applied to Summer and Winter products, resulting in four simulation models. The two simulation approaches deliver similar results for both Summer and Winter products, namely that all four allocation methods are approximately equally e ective.

AFRIKAANSE OPSOMMING: Die toewysing van voorraad na winkels is een van die belangrikste prosesse in die bestuur van 'n kettingwinkel. In die klere-industrie behels toewysingsbesluite onder andere die bepaling van hoeveelhede van elke grootte (byvoorbeeld klein, medium en groot) wat aan elke winkel gestuur moet word. 'n Gevallestudie van hierdie probleem in Pep Stores Bpk. (PEP), een van die vernaamste kleinhandelaars in Suid-Afrika, word in hierdie projek beskou. In PEP word produkte sowat sewe maande voordat dit in die winkels beskikbaar is, by fabrieke bestel. Vanaf die fabrieke word die produkte na distribusiesentra verskeep, vanwaar dit per pad na die onderskeie winkels versprei word. Voordat die produkte bestel word, word voorlopige toewysingsbesluite geneem. Wanneer die voorraad by die distribusiesentra aankom, word besluite in verband met die toewysing van produkte en groottes aan winkels ge naliseer. Toewysingsbesluite word gedurig aangepas deur die seisoen soos meer onlangse verkoopsdata beskikbaar word. In hierdie tesis word simulasiemodelle ontwikkel om vier toewysingsmetodes in terme van totale verwagte verkope, tekorte en surplusse te vergelyk. Die algoritmes sluit PEP se huidige algoritme in, asook 'n bestaande algoritme wat die verwagte aantal weke tekorte en surplusse wat by winkels voorkom, minimeer, 'n nuwe algoritme met die doel om verwagte verkope te maksimeer, en 'n verslapping van die nuwe algoritme. Die simulasiemodelle word volgens twee modelleringsbenaderings ontwikkel. Elke benadering word op Somer- en Winterprodukte toegepas, sodat daar vier simulasiemodelle ontstaan. Die twee simulasiebenaderings lewer soortgelyke resultate vir Somer- en Winterprodukte, naamlik dat al vier toewysingsmetodes ongeveer ewe e ektief is.

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