Industrial Engineer Engineering and Management Solutions at Work

September 2012    |    Volume: 44    |    Number: 9

The member magazine of the Institute of Industrial and Engineers

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Management by Paul Engle

Industrial Engineer's monthly column about engineering management (September 2012) 

Take the gamble out of forecasting

You have been asked to optimize the size, location and inventory levels of a new warehouse. Your source of supply is offshore, with long lead-times and variable shipping times based on seasonality and other factors. Customer demand varies by season and is sensitive to the business cycle. Forecasting demand is problematic. Management sets on-time delivery goals at 100 percent of customer request, including same-day deliveries for large accounts. How large should the warehouse be, where should it be, and how much inventory should be kept to maximize service levels and inventory turns and minimize cost?

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