A practical approach to measuring the impacts of stockouts on demand
Journal of Business & Industrial Marketing
ISSN: 0885-8624
Article publication date: 23 May 2019
Issue publication date: 14 June 2019
Abstract
Purpose
This paper aims to propose a statistical method to measure the impacts of stockouts on demand, using a segmented linear regression model.
Design/methodology/approach
The proposed method is applied to data sets from large retail chains to measure the impacts of stockouts of an item on substitute items. The measured impacts of stockouts can be used to estimate the true demand of the sold-out item by recovering the lost demand (turned-away demand), as well as to estimate the true demand of the substitute item by reducing the extra demand.
Findings
This study found that estimated true demand by the proposed method improves sales forecasting and calculation of the annual expected revenue.
Originality/value
A new method to measure the impacts of stockouts on the demand of substitute items was proposed. The proposed method is practical, in that, it is conceptually simple, computationally efficient and applicable in general scenarios. Also, the proposed method is scalable for larger data sets.
Keywords
Acknowledgements
This work has supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIT) (No. 2017R1C1B2007416).
Citation
Kim, S., Kim, H. and Lu, J.-C. (2019), "A practical approach to measuring the impacts of stockouts on demand", Journal of Business & Industrial Marketing, Vol. 34 No. 4, pp. 891-901. https://doi.org/10.1108/JBIM-04-2018-0126
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited