Inventory Allocation
Problem
An e-commerce supplement provider wanted to better allocate their inventory across multiple 3PL locations to reduce shipping costs.
What would be the best allocation and how much could they save?
Solution
I reviewed their order history, calculated distances to relevant 3PL locations, and made a recommendation on how much of each sku should go in each location.
This saved them 5 figures of shipping costs yearly.
The approach
What was the problem and how did we solve it?
The non-profit had a limited amount of perishable food-based donations that they needed to distribute in a short amount of time due to the perishability. The non-profit was connected to several dozen donations centers. Each donation center had a maximum amount of product they could hold and frequency with which they could turn product.
When a new perishable donation came in, the non-profit needed a quick way to determine how much should be allocated to each donation center without having to ask each donation center to place an order for what they needed.
Success in this project was measured by how much faster each donation could be distributed.
I start my projects by understanding the flow of the business. While walking through the flow, we learned together that we had all the information we needed to predict accurately where donations should go when they came in, but we needed a system to track all three aspects of distribution - the incoming product from the non-profit, the product that had not yet been distributed, and the outgoing product as it was regularly distributed. The client did not have the resources to pay for software to do this, so we came up with a scrappy solution in Excel.
We built a model based on historical data that at any point could predict how much inventory was at any given donation center and how much additional product a donation center could hold.
The model was a great success - it allowed the non-profit to make distribution decisions within minutes rather than days on key donations, a 80% decrease in time spent allocating, thus getting fresher and more food faster to donation centers than before.