Determining optimal inventory and discount levels in multi store, multi item inventory systems

Abstract

This study focuses on the management of the inventory system in one of the biggestbook and music chain stores in Turkey. The aim is to increase the profitability of the firmby determining the best ordering policy and the discount option. This is achieved by developing a simulation model and running it for two types of ordering policies. In the firstpolicy, a store is allowed to receive products both from the warehouse and other stores.The second policy does not allow transfer of the products between stores. The necessaryinput data for the model is derived form the actual sales data within the past two years. The results indicate that transferring products between stores increases the profitability of thesystem. It is also found making discounts on the prices is not economically viable. Theoutcomes of this study guide the managers in their decision-making process of orderingand pricing on the basis of product groups, and determining the inventory levels at each store.