Redesigning one-warehouse n-retailer routing model in inter-store stock transfer operations of an international retail chain distribution

Abstract

Purpose: The effectiveness of product replenishment and responsiveness of customer service delivery impact largely on satisfaction and retention of customers in retail chain logistics distribution. The fast moving goods in the complex delivery network and limited vehicle resource often lead to long customer waiting time in stock replenishment. With lack of literature systematically reviewing factors affecting retail distribution in inter-store stock transfer services and improving the operations, the purpose of this paper is to analyse and enhance this service for the retail to reduce customer dissatisfaction by developing an integrated quality service improvement methodology and an optimisation tool to improve the product delivery services. Design/methodology/approach: This paper reviews inter-store stock transfer operations and the process capability of an international retail chain, and proposes improvements by integrating Six Sigma, factor analysis, and optimisation modelling. User experience and expectations are evaluated through an empirical survey. A novel principle component factored inter-store stock transfer model is developed to improve replenishment operations. A total of 11 factors affecting inter-store stock transfer delivery time are analysed. An extended model with principal component factors incorporated is developed for the simulation. Findings: The Cpk value of 0.51 shows significant difference between the experienced and expected waiting time. With the inter-store stock transfer optimisation model developed, the model assists traffic personnel on the vehicle route planning with multiple pick-up and drop-off locations. The system also ensures the best routing with a minimal travelling time planned, facilitating a reduction of the inter-store stock transfer time, thus improving the customer waiting time. Four significant factors affecting the delivery time are also identified from exploratory and confirmatory factor analysis. The results are analysed with an extended principal component factored inter-store stock transfer model. Practical implications: The developed inter-store stock transfer models minimise stock transfer time, increase customer satisfaction, and reduce loss of sales. An integrated service quality improvement methodology has been developed and applied in reviewing significant factors affecting inter-store stock transfer operations. Originality/value: This paper presents an analysis on inter-store stock transfer operations of an international retail and proposes enhancements on the operations by integrating Six Sigma, factor analysis, and optimisation modelling. A novel principal component factored inter-store stock transfer model is developed to improve the stock replenishment operations.