The Effect of Product Variety on Inventory Turnover in Different Modes of Operation

We study the effects of product variety on operational metrics - inventory turnover and on sales in different mode of operations. Research has shown that performance metrics can vary in different mode of operations. Using 41 months of data from a large retailer, we show that correlation of product variety with inventory turnover and sales is not always negative or positive as shown in previous studies. This correlation can vary depending upon the mode of operations and type of product. Our study highlights impact of increased product variety on inventory turnover and sales in different mode of operations that has previously been overlooked in studies of retail product variety and inventory management. It also quantifies the impact of product variety on inventory turnover and sales

Inventory Policy Implications of On-Line Customer Purchase Behavior

In this paper we will examine some implications of online data for a classical operations management model, vis. the Economic Order Quantity model. Customer waiting behavior on individual orders (which occur during stockouts) forms the basis for evaluating the potential backorders. The potential attraction of reducing inventory holding costs must be balanced with the loss due to lost sales. We clearly delineate the conditions under which it is profitable to stock out every ordering cycle, and the conditions under which the traditional economic order quantity model still holds. In order to allow practical application of the model, we develop a number of different approaches to the problem of estimating the backorder function from available on-line transaction data

Response Strategies for Critical Supply Shortages in Healthcare

The shortage of critical medical supplies in healthcare facilities is of obvious concern to both medical professionals and patients. Speci cally, the growing concern in this area is motivated, at least in part, by our dependence on generic pharmaceuticals. In the absence of FDA restrictions on the production of critical generic goods (e.g. morphine), manufacturers possess little financial incentive to produce numerous products whose patents have expired, but remain critical to patient care. Therefore, faced with crippling shortages, hospitals are left seeking ad-hoc solutions for meeting patient demand of these items. This work considers quantitative response strategies to mitigate the impact of these shortages. Speci cally, lateral transshipments of supplies amongst cooperative hospitals are analyzed to assess their impact and utility with respect to the amount of met demand and the quality of service. In addition, a multi-objective optimization model is considered that off ers insight about how intelligently structured collaboration between hospitals can improve service levels and reduce unmet demand across the system while considering transportation costs. The combination of these analyses provides medical decision-makers with a fundamental level of intuition necessary to guide hospitals in their reaction to supply shortages

Assessing the benefits of remanufacturing option under one-way substitution and capacity constraint

In this article, we investigate the profitability of remanufacturing option when the manufactured and remanufactured products are segmented to different markets and the production capacity is finite. It is assumed that remanufactured products can be substituted by the manufactured ones. A single period profit model under substitution is constructed to investigate the system conditions under which remanufacturing is profitable. We present analytical findings and computational results to show profitability of remanufacturing option under substitution policy subject to a capacity constraint of the joint manufacturing/remanufactruing facility

Assortment Planning of Automotive Products: Considerations for Economic and Environmental Impacts of Technology Selection

A manufacturer’s assortment is the set of products that the company offers to its customers. Assortment planning considerably affects both the sales revenue and product offering costs for the company and it had experienced growing attention across different industries over recent decades. In this study, we propose a modeling framework that seeks to identify the optimal assortment for a manufacturer of configurable products (in particular, automobiles). Our model accounts for environmental considerations (Corporate Average Fuel Economy requirements, tail-pipe emissions, and greenhouse gas emissions related to the production of the fuel used to power the vehicle) during assortment planning. We formulate the economic and environmental requirements in the model through a mixed-integer programming framework and present a hypothetical product case study motivated by an American automaker that involves 120 potential configurations employing different engine technologies (gasoline, diesel, and hybrid technologies). Notwithstanding consideration for consumer perceptions and acceptance, the results of this research work show that diesel technologies are a better choice to satisfy average fuel economy requirements compared to hybrid and conventional powertrains with current technology maturity

Managing Limited Retail Space for Basic Products: Space Sharing vs. Space Dedication

In this paper, we study the problem of managing limited retail shelf or storage space for basic products by considering two inventory management strategies: space dedication and space sharing. When space is dedicated to each product, there is more flexibility in planning as different products can be replenished independently. In contrast, when space is shared across different products, there is potential for saving space; however, replenishment has to be coordinated across products and this leads to additional costs due to the lack of flexibility in replenishing each product individually. We model this problem as a non-linear mixed integer program and develop an effective heuristic and an upper bound for each strategy. We introduce three different but consistent criteria to compare each strategy. Through an extensive computational study, we identify the most relevant factors that impact the relative benefit of space sharing over space dedication. In addition, we show that space sharing with an optimal replenishment scheduling program can on average reduce space consumption by 31%