The company’s procurement department considers current inventory levels,
expected demand, and lead times to decide what products to order, when to order, how
much to order, and how to deliver from vendors to warehouse. The allocation department
takes into account information about inbound shipments, inventory levels, and store
demands when determining what products to deliver, when to deliver, how much to
deliver, and how to deliver from warehouse to stores.
Although this warehouse serves as a hub in the supply chain, it operates in a
reactive mode; that is, inventory and transportation plans are determined first and the
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warehousing plans are determined later. This sequential approach results in the
warehouse experiencing substantial variation in daily workload, which causes the
warehouse manager to scramble for resources during peak times and experience resource
under-utilization during drought times. Figure 1.2 shows the number of units picked per
week at the company’s warehouse in the year 2011, where the weekly variation in the
workload ranges from nearly 42% to 220% of that year’s weekly average. Data from
another of our industry partners, a Fortune 100 grocery distributor, during August 29 –
September 4 of 2011 indicated a variation in the number of units picked (76% and 153%)
at one of their US warehouses (see Figure 1.3).