Improving Allocation of Inventory for Quick Response to Customer Orders: A Case Study

Abstract

This paper is based on a study of the allocation of available inventory to customer orders at a large apparel manufacturing organization. As a number of items were in short supply at the beginning of each month, few orders were being filled completely. Majority of the orders were being filled at the end of the month when most inventory items become available for shipment. The finished goods distribution center at the company was thus faced with an uneven distribution of workload during the month resulting in reduced labor productivity and significant overtime cost. A new heuristic-based procedure for allocating available inventory to customer orders was developed with a number of unique features. The heuristic was tested against the old allocation procedure as well as against linear and integer programming models of the problem. The heuristic was found to perform much better than the old allocation procedure and almost as well as the mathematical models. The new allocation procedure was implemented and a more even distribution of workload, lower inventories, reduction in labor cost, and quicker response to customer orders were achieved.