| Abstract: | The problem of optimal variety in inventory heretofore has been approached on an individual item basis. This paper demonstrates the analysis of aggregate inventory through the use of the log-normal distribution. The theory and application of this distribution to inventory problems are reviewed. This distribution is then applied to the problem of optimal variety, measuring the impact on sales and cost of deletion of slow-moving items in order to determine the optimal assortment for profitability. This then leads to analysis of optimal margin determination for slow-moving items. The final part of the discussion deals with inventory characteristics of the distribution channel, utilizing the characteristics of the log-normal distribution. |
