Variable selection framework for allocating products to recommended replenishment models in VMI applications

Abstract

Purpose: The purpose of this paper is to propose a multivariate-based method to classify products in replenishment categories based on principal component analysis (PCA) along with two classification algorithms, k-nearest neighbor (KNN) and linear discriminant analysis (LDA). Design/methodology/approach: In the propositions, PCA is applied to data describing products’ features and demand behavior, and a variable importance index (VII) is derived based on PCA parameters. Next, products are allocated to inventory replenishment models applying the KNNs to all original variables; the classification accuracy is then assessed. The variable with the smallest VII is removed and a new classification ..