The Top-Dog Index: A New Measurement for the Demand Consistency of the Size Distribution in Pre-Pack Orders for a Fashion Discounter with Many Small Branches

TL;DR

The paper introduces the Top-Dog-Index, a new demand measurement tool for apparel sizes in fashion retail, which improves order accuracy and yield by assessing size scarcity per branch without relying on demand distribution assumptions.

Contribution

It presents the Top-Dog-Index as a novel, distribution-free heuristic for measuring size demand at the branch level, enhancing pre-pack order optimization.

Findings

The Top-Dog-Index effectively identifies size scarcity per branch.

Using the index increased gross yield by nearly one percentage point.

The approach outperformed traditional demand estimation methods.

Abstract

We propose the new Top-Dog-Index, a measure for the branch-dependent historic deviation of the supply data of apparel sizes from the sales data of a fashion discounter. A common approach is to estimate demand for sizes directly from the sales data. This approach may yield information for the demand for sizes if aggregated over all branches and products. However, as we will show in a real-world business case, this direct approach is in general not capable to provide information about each branch's individual demand for sizes: the supply per branch is so small that either the number of sales is statistically too small for a good estimate (early measurement) or there will be too much unsatisfied demand neglected in the sales data (late measurement). Moreover, in our real-world data we could not verify any of the demand distribution assumptions suggested in the literature. Our approach cannot estimate the demand for sizes directly. It can, however, individually measure for each branch the scarcest and the amplest sizes, aggregated over all products. This measurement can iteratively be used to adapt the size distributions in the pre-pack orders for the future. A real-world blind study shows the potential of this distribution free heuristic optimization approach: The gross yield measured in percent of gross value was almost one percentage point higher in the test-group branches than in the control-group branches.