Static versus dynamic safety stocks in a retail environment with weekly sales patterns

Sales in European retail environments typically follow a weekly pattern having high sales at the end of the week and low sales at the start of the week. In this paper we compare two different ways of setting safety stock norms in a retail environment with weekly sales patterns. The first option is to set a single safety stock norm, which is constant throughout the week. The second option is a safety stock norm which is dynamic since it depends on the weekday. The inventory is controlled periodically and a lost sales environment is assumed. We study the impact of the dynamic safety stock on the inventory holding and shortage costs as well as on drivers of handling costs like the number of orderlines and the workload balance, since earlier research has shown that handling costs are relatively large for retailers. We use a full factorial experiment and simulation to evaluate both inventory replenishment strategies.