Planning for Demand Uncertainties during Promotional Cycles of Modern Retail

- by Devdatta Jain & Meenakshi Chhajer *

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Innovations such as point-of-sale (POS) scanner-based automatic ordering and a CR system can transform a traditional "push" distribution channel into a demand "pull" system. In the traditional channel, product is pushed down the channel. Firms at each level hold inventory to buffer their own internal operations from uncertainties of upstream supply and downstream demand. Innovative POS ordering and CR can dramatically reduce system-wide inventory, transportation and warehousing costs, and stock-out problems at retail. By deploying IT and new logistical procedures, the inventory can be shifted to the distributor, enabling the retailer to close its central receiving warehouse and receive direct-to-store shipments based on real-time sales data. By employing such innovations, operational improvements that dramatically lower costs and improve service are technically feasible. However, the characteristics of specific exchanges often make it difficult, and occasionally, impossible, for the trading partners to deploy the required investments and adopt the new activity sets.

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* Contributed by: -
Devdatta Jain & Meenakshi Chhajer,
National Institute of Industrial Engineering (NITIE), Mumbai.

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