Quantifying the value of reduced lead time and increased delivery frequency

A large consumer package goods company would like to know the answer to the following question. What is the value to its customers of increased delivery frequency or reduced lead time? To answer this question, we collected shipment and inventory data for three customers: a mass merchandiser, a grocery store chain, and a drug store chain in the US. We examined the shipment histories to the customers' Distribution Centers (DCs) in the West, the Midwest, and the East for SKUs from three product families. We developed a continuous review QR inventory model to calculate the theoretical inventories for these high volume SKUs. We used this model to assess the theoretical inventory requirements for multiple scenarios entailing some form of increased frequency or decreased lead time. Some companies run heavy promotions during which time the majority of sales occur. If such a company is to benefit from reduced lead time from its supplier to their DCs, shipments from their DCs to stores must be frequent enough to respond to their stores' needs during a promotion.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2007

Author dc:creator

• Walkenhorst, Joseph Sean

Advisor dc:contributor.advisor

• Stephen C. Graves.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/40355

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/40355