Importance

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Abstract

The invention provides methods and apparatus for determining optimum inventory allocations across retail stores and departments. According to one aspect of the invention, such methods include inputting an historical return on investment for each of plural merchandise departments and/or stores (collectively, 'departments') in a retail enterprise. This return on investment can be, for example, a gross margin return on investment (GMROI) that is a function of the inventory allocated to each respective department in each of one or more prior periods, e.g., selling seasons, as well as the financial return achieved by that department based on that inventory. The method further includes determining inter-departmental (or inter-store) risks in the historical returns on investment (e.g., GMROI's). This can be determined, for example, as a function of the covariance between the historical GMROI's of each pair of departments in the plurality of departments. Still further, the method includes determining an optimal allocation of inventory budget to each of the departments for a current or future time period, e.g., a current or future selling season. That optimization is determined by maximizing the total return (e.g., gross margin dollars, if GMROI is used as the return on investment measure) for those departments, as a whole, as a function of one or more constraints--at least one of which is a tolerance of risk in the return on investment (e.g., GMROI) for the plural departments, as a whole. That optimum allocation is displayed, according to the method, in a report to an general merchandise manager or other person. Alternatively, or in addition, the optimum allocation is used to fund accounts used by the departments to acquire inventory.

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First Claim