Steps for Impact Approximation:

Total Sales Revenue in Gulf Region (R):

1. Lululemon's total annual sales revenue in the Gulf region is approximately $50 million
2. Industry OOS Rate: The typical industry out-of-stock rate ranges between 5% to 10% in retail. For estimation, let's assume Lululemon faces an OOS rate of 7%.
3. Sales Impact due to OOS (S): Studies suggest that 30% to 50% of lost sales due to OOS are not recovered. We'll assume 40% of lost sales are not recovered.
4. Estimate of Wasted Money (W): The wasted sales revenue can be calculated by applying the OOS rate and sales impact percentage to the total revenue.

Formula:
• W=R×OOS_Rate×Sales_Impact
• W=50,000,000×0.07×0.40=1,400,000

Solution Impact

Predictive ML solution reduced the OOS rate by 40%, i.e:

1. New_OOS_Rate=Old_OOS_Rate×(1−Reduction_Percentage)
2. New_OOS_Rate=7%×(1−0.40)=4.2%
3. New_W=50,000,000×0.042×0.40=840,000
4. ΔW=1,400,000−840,000=560,000

Conclusion

• Impact in Dollars: After implementing the predictive ML solution, the wasted revenue would decrease by $560,000 annually.
• Percentage Impact: This represents a 40% reduction in the wasted revenue caused by Out-of-Stock scenarios.