Medline Industries, Inc.
Russell D. Meller
University of Arkansas
The objective of this projectt was to aid Medline in quantifying the impact of purchase/inventory decisions on warehouse operational costs.
Inventory policy decisions can impact the operational performance of a warehouse. For example, the procurement department of a company may purchase increased quantities of various products in order to obtain a discounted price (i.e., a “good buy”).
The resulting increase in inventory may require that more aisles in the warehouse are utilized than would be otherwise, thus impacting the costs of all products in the warehouse (not just those associated with a “good buy”).
The statistical analysis revealed that put-away, reserve pick, and replenishment operations were negatively impacted by increases in inventory. The linear regression models use to analyze seven of Medline’s facilities that werecarrying extra inventory as a result of “good buys.” The models were used topredict the extra time required for warehouse operations, and this time was translated to a per pallet cost for carrying extra inventory. The results from the models indicated that the excess inventory did not increase the operational costs beyond the savings that were achieved from the “good buys” at the seven facilities.