Paccar Hall, Room 292

SPEAKER: Narendra Agrawal
AFFILIATION:  Santa Clara University
AREA:  Operations Management

TITLE: 
Optimal Inventory Management Using Retail Prepacks 

ABSTRACT:
Many types of retail items are shipped through the supply chain from the manufacturer to the stores in "prepacks," which may consist of multiple units of the same stock keeping unit (SKU) or combinations of related SKUs packaged together.  Prepacks reduce shipping and handling costs in the supply chain, but they can also increase supply - demand imbalances.   We generalize the well-known (R, nQ) policies and develop a methodology that determines optimal replenishment policies for arbitrary combinations of different prepacks.  The model uses stochastic dynamic programming, and can be solved by a linear program in the steady state case.  We formulate the general multi-SKU prepack case and develop specific solutions for the one SKU and two SKU prepack cases.   A numerical analysis of various one and two SKU prepack choices leads to interesting managerial insights about the optimal design of prepacks. This work is part of a larger research agenda focusing on flexibility in retail supply chains, which I will also describe during the presentation.