Under the guidance of Prof.

Sonu Verma

Pallavi Agrawal
EPGDIB 2016-18, 20A

Analytics for medical retail store

supply chain efficiency
Introduction ................................................................................................................................................... 3

Objectives....................................................................................................................................................... 3

Methodology .................................................................................................................................................. 4

Expected outcome ......................................................................................................................................... 4

Bibliography ................................................................................................................................................... 5
INTRODUCTION

There is a high variability in demand for medicines over time. The safety stock levels
identified once cannot be applied forever. Due to changing season, global warming,
new diseases, new researches, the demand keeps changing and so the pattern of
usage. If we dont maintain the inventory based on the varying demands we might
end up in over stocks or under stocks. In both cases, we will incur costs and the
service level of the retail store will get affected. Also, due to increasing competition
and product variety, minimizing investment in inventory management can give a
huge benefit to any retailer.

The safety stocks level maintained by the store is a way to avoid stock outs and
provide a consistent quality of service to the end users. The level of safety stocks to
be maintained is decided based on various factors, like demand of that particular
product, lead time, service level etc. As, these parameters keep changing so should
the level of safety stocks be adjusted to meet the change and optimize cost and
space usage.
Optimizing stock level at the retail store will also help optimizing aggregate level of
inventories at the central warehouses. Reducing the variation at individual retail
stores will optimize the overall variation and the inventory costs at the central level
and improve supply chain performance.

The sales or demand data can also be used to forecast future sales and manage the
future inventory and costs.

OBJECTIVES

Based on the current sales data of a retail medical store, we aim to:

Forecast demand for the next year for different product categories and hence
facilitate inventory planning,
 Align and identify demand variation and propose a probabilistic inventory
management model to maintain a certain service level for the consumers,
Reduce costs at central warehouse by studying the aggregate demand and
reduce the overall demand fluctuation of inventory required by the individual
stores.

METHODOLOGY

This study aims to use analytical models and techniques to review reorder points
(ROP) dynamically and re-optimize the replenishment decision variables. We will use
data from secondary sources and create metrics to measure the improved
performance of supply chain. We will provide qualitative insights into how the data
from individual store can reduce the variability at the warehouse level which caters
multiple retailers in a given region and this might help reduce the bull whip effect
due to fluctuating demand parameters.

We will gather primary data from the medical retail stores to understand the current
supply chain metrics and costs associated with inefficiency due to variable demand.
We will compare the performance of static ROP and dynamic ROP and measure the
gains in terms of both holding costs and maximum storage capacity requirements.

We will be using time series models to predict future demand based on the past
history of orders received for particular product categories by the retail store.

EXPECTED OUTCOME

By analyzing the demand pattern and optimizing the supply chain process, our
report will provide the following:

Recommendations to reduce costs by analyzing the future demand

 Provide optimum stock levels based on demand variation at the level of both
- individual stores as well as the central warehouse

BIBLIOGRAPHY

Chandandeep S. Grewal, S.T. Enns, Paul Rogers (2015). Dynamic reorder point
replenishment strategies for a capacitated supply chain with seasonal demand.
Journal Computers and Industrial Engineering Volume 80 Issue C

Chopra, Sunil & Reinhardt, Gilles & Dada, Maqbool. (2004). The Effect of Lead Time
Uncertainty on Safety Stocks. Decision Sciences - DECISION SCI. 35. . 10.1111/j.1540-
5414.2004.02332.x.

Abbey, James Duane, "Analyzing impacts on backorders and ending inventory in

MRP due to changes in lead-time, demand variability and safety stock levels" (2008).
Retrospective Theses and Dissertations. 15360.

Alin Constantin RDANU. (2016). Inventory management, service level and safety
stock. Journal of Public Administration, Finance and Law.