Update Store Inventory Operations/replenishment_reorder_points.md
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Store Inventory Operations/replenishment_reorder_points.md
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@@ -16,4 +16,80 @@ Walmart's ARS generates replenishment orders nightly based on:
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- Lead time (supplier + DC + transportation)
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- Safety stock
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## 3. Reorder Point Formula
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- Lead time (supplier + DC + transportation)
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- Safety stock
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## 3. Reorder Point Formula
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ROP = (Average Daily Demand × Lead Time) + Safety Stock
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Safety Stock = Z × σ_demand × √Lead Time
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Where:
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Z = service factor (1.65 for 95%, 2.33 for 99%)
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σ_demand = standard deviation of daily demand
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Lead Time = supplier + DC processing + transportation (days)
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### 3.1 Example Calculation
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- Average daily demand: 120 units
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- Lead time: 5 days
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- σ_demand: 25 units/day
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- Service level: 95% (Z = 1.65)
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Safety Stock = 1.65 × 25 × √5 = 92 units
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ROP = (120 × 5) + 92 = 692 units
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## 4. Service Level Targets
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| Category | Target Service Level | Z Factor |
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|---|---|---|
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| Grocery (perishable) | 99% | 2.33 |
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| Grocery (shelf-stable) | 97% | 1.88 |
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| Consumables | 97% | 1.88 |
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| Health & Wellness | 95% | 1.65 |
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| General Merchandise | 95% | 1.65 |
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| Apparel | 92% | 1.41 |
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| Seasonal | 90% | 1.28 |
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## 5. Lead Time Components
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| Component | Typical | Variability |
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|---|---|---|
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| Supplier production | 2–14 days | ±3 days |
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| DC processing | 1–2 days | ±0.5 days |
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| Transportation | 1–5 days | ±1 day |
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| Store receiving | 0.5–1 day | ±0.25 days |
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**Total lead time** used in ROP is the **90th percentile** of historical
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lead times, not the average, to protect against variability.
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## 6. Min/Max Settings
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- **Min** = ROP
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- **Max** = ROP + (Average Daily Demand × Review Period)
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- Review period = 7 days (weekly replenishment cycle)
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- Order quantity = Max − On-hand − In-transit
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## 7. Manual Overrides
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Manual overrides allowed when:
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- Promotional event (ad, rollback, seasonal)
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- New item launch (no history)
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- Supplier constraint
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- Weather event (hurricane, snowstorm)
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- Local event (sports, festival)
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Override approval:
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| Override Size | Approver |
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|---|---|
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| < $5K | Store Manager |
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| $5K–$25K | Market Manager |
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| $25K–$100K | Regional Inventory Mgr |
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| > $100K | Director Inventory Ops |
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## 8. KPIs
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| KPI | Target |
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|---|---|
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| In-stock % | ≥ 97% |
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| Forecast accuracy (MAPE) | ≤ 25% |
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| Inventory turns | ≥ 8x/year |
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| Excess inventory (> 90 days) | ≤ 3% of SKUs |
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| Replenishment order accuracy | ≥ 99% |
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## 9. Escalation
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- Store: Inventory Control Specialist
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- Market: Market Inventory Manager
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- Corporate: Director Inventory Ops
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