Optimizing Inventory with Frequent Pattern Growth Algorithm for Small and Medium Enterprises

Abstract

The success of a business heavily relies on its ability to compete and adapt to the ever-changing market dynamics, especially in the fiercely competitive retail sector. Amidst intensifying competition, retail business owners must strategically manage product placement and inventory to enhance customer service and meet consumer demand, considering the challenges of finding items. Poor inventory management often results in stock shortages or excess. To address this, adopting suitable inventory management techniques is crucial, including techniques from data mining, such as association rule mining. This research employed the FP-Growth algorithm to identify patterns in product placement and purchases, utilizing a dataset from clothing store sales. Analyzing 140 transactions revealed 24 association rules, comprising rules with 2-itemsets and frequently appearing 3-itemset rules. The highest support value in the final association rules with 2-itemsets was 10% with a confidence level of 56%, and the highest support value in the 3-itemsets was 67% with the same confidence level. Additionally, three rules had a confidence level of 100%. Thus, the association rules generated by the FP-Growth frequent itemset algorithm can serve as valuable decision support for sales of goods in small and medium-sized retail businesses.