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Reordering Algorithm Documentation

The document outlines a method for identifying bestsellers and determining reorder amounts for inventory management. It includes key terms, calculations for revenue and quantity sold, normalization of metrics, and a final factor ranking system. Additionally, it describes the algorithm for calculating expected sales, depleted inventory, and the amount to reorder based on past data and expected sales trends.

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Arghya Patra
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6 views11 pages

Reordering Algorithm Documentation

The document outlines a method for identifying bestsellers and determining reorder amounts for inventory management. It includes key terms, calculations for revenue and quantity sold, normalization of metrics, and a final factor ranking system. Additionally, it describes the algorithm for calculating expected sales, depleted inventory, and the amount to reorder based on past data and expected sales trends.

Uploaded by

Arghya Patra
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Finding Bestsellers and

Reordering algorithm
1) Finding Bestsellers
Key Terms
• Available store-days
• Max available days
• Qty_sold_last_[30,60]_days
• Revenue_last_[30,60]_days
• ROS (Rate_of_sale)
• Availability_percentage
• Extrapolated_metrics
• Final_Factor
1) Finding Bestsellers
Available store-days = 10
Unique_stores = 4
Unique_days = 4
Max_available_days = 4*4 = 16
ROS( rate_of_sale) = qty_sold (in 4 days)/ Available store days
Availability_percentage = (Available store-days/ Max_available_days)*100 %

Sku = GDLER01 Day 1 Day 2 Day 3 Day 4


Store 1 1 1 1 1
Store 2 1 1 0 0
Store 3 1 1 1 0
Store 4 1 0 0 0
Store 5 0 0 0 0
1) Finding Bestsellers
Extrapolation

Condition Multiplier
If availability percent < 10% (2* metric)
If availability percent is (10%-30%) (1.75 * metric)
If availability percent is (30%-60%) (1.50 * metric)
If availability percent is (60%-80%) (1.25 * metric)
If availability percent is > 80% (1.00 * metric)
1) Finding Bestsellers

Calculating revenue ROS and Qty_sold ROS

𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑙𝑎𝑠𝑡 60 𝑑𝑎𝑦𝑠


𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑅𝑂𝑆 = 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 ∗
60

𝑄𝑡𝑦 𝑠𝑜𝑙𝑑 𝑙𝑎𝑠𝑡 60 𝑑𝑎𝑦𝑠


𝑄𝑡𝑦 𝑠𝑜𝑙𝑑 𝑅𝑂𝑆 = 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 ∗
60
1) Finding Bestsellers
Normalization

Normalization = metric – MIN(metric) / MAX(metric) – MIN(metric)

Normalizing key metrics:-


• Revenue ROS
• Qty sold ROS
• Revenue last 60 days
• Qty last 60 days
1) Finding Bestsellers
Final Factor

𝐹𝑖𝑛𝑎𝑙 𝐹𝑎𝑐𝑡𝑜𝑟 𝐹𝐹 = 0.1 ∗ 𝑛𝑜𝑟𝑚𝑟𝑒𝑣𝑟𝑜𝑠 + 0.2 ∗ 𝑛𝑜𝑟𝑚𝑞𝑡𝑦𝑟𝑜𝑠 + 0.3 ∗ 𝑛𝑜𝑟𝑚𝑟𝑒𝑣 + 0.4 ∗ 𝑛𝑜𝑟𝑚𝑞𝑡𝑦

• Create this column and then arrange it in descending order and then rank them.
• Rank 1-400 : Bestsellers
• Rank 400-700: Mid-High
• Rank 700 – 1000: Mid-Low
• Rank > 1000 : Low
2) Finding Reorder Amount
Required Inputs

• Past Reorder amount


• Past reorder date
• Expected days to reach stores
• Month for which reorder is planned
2) Finding Reorder Amount
Timeline and Gist of algorithm
+ Amount to Reorder
(To maintain further days of cover)

Depleted inventory
Depleted inventory Resupplied inventory

- Expected sales - Expected sales


till resupply

Current Inventory Past Reorder hits stores This reorder hits stores
status

~50 days
2) Finding Reorder Amount

(a) 1st Expected sales till previous resupply reaches stores

𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠1 = 𝑅𝑂𝑆 ∗ 𝑛𝑢𝑚𝑠𝑡𝑜𝑟𝑒𝑠 ∗ (𝐷𝑎𝑦𝑠 𝑡𝑖𝑙𝑙 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑟𝑒𝑠𝑢𝑝𝑝𝑙𝑦 ℎ𝑖𝑡𝑠 𝑠𝑡𝑜𝑟𝑒𝑠)

(b) Depleted Inventory

𝐷𝑒𝑝𝑙𝑒𝑡𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦1 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 − 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠1

(c) Resupplied Inventory

𝑅𝑒𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦1 = 𝐷𝑒𝑝𝑙𝑒𝑡𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦1 + 𝑅𝑒𝑜𝑟𝑑𝑒𝑟 𝑎𝑚𝑜𝑢𝑛𝑡


2) Finding Reorder Amount
(d) Expected Sales 2

𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠2 = 𝑅𝑂𝑆 ∗ 𝑛𝑢𝑚𝑠𝑡𝑜𝑟𝑒𝑠 ∗ (𝐷𝑎𝑦𝑠 𝑡𝑖𝑙𝑙 𝑜𝑢𝑟 𝑟𝑒𝑜𝑟𝑑𝑒𝑟 ℎ𝑖𝑡𝑠 𝑠𝑡𝑜𝑟𝑒𝑠)

(e) Depleted Inventory 2

𝐷𝑒𝑝𝑙𝑒𝑡𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦2 = 𝑅𝑒𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦1 − 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠2

(f) Amount of Inventory required to maintain 30 days of cover

𝐴𝑚𝑜𝑢𝑛𝑡 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 = 𝑅𝑂𝑆 ∗ 𝑛𝑢𝑚𝑠𝑡𝑜𝑟𝑒𝑠 (~215) ∗ (30)

(g) Amount to reorder

𝑟 >0 =𝑟
𝑟 = 𝐴𝑚𝑜𝑢𝑛𝑡 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 − 𝐷𝑒𝑝𝑙𝑒𝑡𝑒𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦2 𝐴𝑚𝑜𝑢𝑛𝑡 𝑡𝑜 𝑟𝑒𝑜𝑟𝑑𝑒𝑟 = ቊ
𝑟≤0 =0

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