Publication Date
Authored by
Hyuk Jin Cho, Ketan Lahoti
Advisor(s): Bruce Arntzen
Topic(s) Covered:
  • Optimization
  • Retail
  • Case Study
  • Healthcare
  • Inventory

With an aim to avoid stock-outs, retail pharmacy business constantly deals with the problem of inventory build-up across the supply chain. There are myriad reasons for the rise in inventory such as promotions and forecasting errors. While there is a need to improve the forecasting accuracies with better data coming from the point of sale (POS), the increasing complexities associated with such factors as climate change affecting flu seasons and occurrences of disasters compound the forecasting errors. Hence, there is a need in the system to identify excess stocks being built up across various locations and reduce the inventory. The client is considering to address the problem of excess inventory by sending it from its stores to Mail Centers. The Mail Centers will then sell off this inventory quicker as it fulfills far more prescriptions per day in comparison to the stores.

The focus of this study is to develop a model to automate this process of quantifying excess inventory across thousands of retails location for the client. We then suggest a process to reduce the stocks by issuing operational guidelines for each store to pick top stock keeping units (SKUs) and pack and ship them from stores to respective Mail Centers. The frequency for doing out this activity is also suggested after carrying out the cost benefit analysis involved.