Ordering System

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HELSINKI UNIVERSITY OF TECHNOLOGY Department of Industrial Engineering and Management Laboratory of Industrial Management

Carl Michael Falck

Efficient Store Ordering

Thesis submitted in partial fulfillment of the requirements for the degree of Master of Science in Engineering Espoo, May 26, 2005

Supervisor: Instructor:

Kari Tanskanen Johanna Småros

Professor of Industrial Management Master of Science in Technology

HELSINKI UNIVERSITY OF TECHNOLOGY

ABSTRACT OF MASTER’S THESIS

Author: Carl Michael Falck Subject of the Thesis: Efficient Store Ordering Pages: 60 Date: May 26, 2005 Location: TU Code: TU-22 Industrial Management

Professorship: Industrial Management Supervisor: Professor Kari Tanskanen Instructor: Johanna Småros, Master of Science (Tech.)

Automated store ordering has been offered as a potential solution to many store level problems: Automation could improve availability, decrease inventories, and reduce the time and labor required for ordering. However, despite the potential advantages, it seems that the majority of retailers have only just started to implement automated ordering systems at store level. Furthermore, very little published information can be found on store level processes, not to mention automated store ordering. Therefore, well-documented research on how and if conventional inventory management practices can be applied at store level operations should be extremely engrossing both from academic and business viewpoints. This master’s thesis examines how automated store ordering could more efficiently be utilized to improve store operations and performance. The problem is approached first from the theoretical viewpoint: In the literature review, the retail supply chain and store level processes and performance are examined. Furthermore, inventory management and forecasting practices as well as their application in retailing are reviewed. The empirical work in the thesis consists of a part where survey material form the study “Logistics processes of European grocery retailers” is analyzed, and a case as well as a simulation study. The survey material provides information on how common ASO systems are and what kind of systems actually have been implemented; The case study offers the opportunity to explore the implementation of an ASO system in practice; And the simulations enable developing and testing ways in which the performance of ASO systems can be enhanced. Both the theoretical and empirical parts of the thesis present practical conclusions and results. The most important findings of the thesis are the following: - Many companies have just started to implement automated store ordering systems. The systems in use are typically fairly simple, and they are most often used for managing the normal material flow. Exception situations as well as more challenging product groups are still usually handled manually. - The performance of basic automated store ordering systems can be enhanced by taking into consideration special characteristics of store environment. In case of normal material flow, robust methods are needed to tackle weekday demand and varying replenishment intervals. This can be accomplished by applying material requirements planning logic in order determination. - For efficiently managing promotions with automated store ordering systems, it is important to improve flexibility and react to initial promotion demand.

Key words: Automated store ordering, retail logistics, inventory management, retail store processes

Language: English

TEKNILLINEN KORKEAKOULU

DIPLOMITYÖN TIIVISTELMÄ

Tekijä: Carl Michael Falck Diplomityön nimi: Myymälöiden materiaalivirtojen tehokas ohjaaminen Sivumäärä: 60 Professuuri: Teollisuustalous Työn valvoja: Professori Kari Tanskanen Työn ohjaaja: Diplomi-insinööri Johanna Småros Automaattisesta myymälätäydennyksestä toivotaan monien myymälätason ongelmien ratkaisijaa: Tilaustoiminnan automatisointi voisi parantaa...
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