7 Challenges        

Presented is a case study of a Retailer whose challenge was high-variability in DC receipts.

The Retailer is a department store selling apparel, accessories, cosmetics and footwear for the entire family to small and mid-size towns and communities with over 560 stores in 31 states. There are several vendors who supply goods to the centralized DC. From the DC, the goods are shipped to various stores. There are some replenishment items whose ship dates cannot be adjusted. For other items, the ship dates are changeable.


Problem defined:
  The receipt of goods by the DC varies widely across weeks. For instance, in the first week of April 2006, the receipt of goods by DC is 36.6% of the total inflow of the month. In the last week of April 2006, the receipt of goods by DC is 15.3% of the total inflow of the month. Because of this wide difference in receipts across weeks, the company has to schedule overtime or hire temporary workers at 150% of the original cost during the peak weeks.  
  The company did not have optimal scheduling of shipment. Because of this, the company incurs higher cost due to premium services used.  

The company wants us to build an optimization model that will smooth the inflow of goods into DC in terms of weight keeping in mind that the order should reach the DC on the specified date and the packages should be consolidated into full truck loads as much as possible.

Modelling Approach:

PCI built and perfected a mathematical model that manages inbound flow while smoothening DC receipts; avoiding congestion, higher premiums and sustained reductions in transportation costs.