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Team 1 Cohort A
Chidambara N Gopal
Ganapriya Kalavagunta
Sang Yung Lee
Shashank Sharma
SCM 517: Team Project
Inventory Optimization for Bharat Bazaar
Problem statement
The story so far
Cause and effect analysis
Findings, Insights and Recommendations
GMROI Approach
Newsvendor model
Action Items for Future
Agenda
Bharat Bazaar is currently losing customers due to the unavailability of the products. Bharat Bazaar needs a
tool or forecasting mechanism which can provide some reliable estimate for the demand of products in
near future
Situation
• Bharat Bazaar is a Indian grocery store selling Indian food
products and groceries. It primarily caters to the demand of
the ASU Students and residents near Tempe Campus
• Bharat Bazaar is facing loss of sales due to unavailability of the
products. The unavailability is primarily due to:
̶ FDA and Customs regulations
̶ Transportation and Supply issues
̶ Unforeseen Demand
Complications
• Bharat Bazaar is facing problems managing its inventory. Often
the products are either understocked or overstocked
• The current solution in place doesn’t provide good visibility for
the demand in the near future
Questions
• How can Bharat Bazaar estimate the demand for the near
future so that the orders for the products and groceries can be
placed in advance?
• Can this solution be integrated with the current solution
(GMROI tool) already in place?
We need to develop a forecasting tool for Bharat Bazaar which can be used in conjunction with the GMROI tool which
is currently being used to place orders for the various products.
Bharat Bazaar
• Customs and FDA
• Transportation and Availability
• Loss of business / customers due to unavailability of the products
Worried ClientMy products
are not here 
Competitor 1
Competitor 2
Competitor 3
Use GMROI
The Story so far1
Root causes like Manufacturer delay, FDA, Customs and Transportation costs are out of our control. We
addressed issues related to forecasts and inventory which were resulting in loss of customers and profit
Cause and Effect2
Out of our
Scope
In Scope
When a product goes out of stock, customer
goes to the competitors looking for the
same product.
Inefficient inventory management leads to
high storage cost, understocking /
Overstocking causing decline in profits
GMROI model tells you what to order but fails in
estimating the demand
There is a requirement of a stochastic estimation system
to predict the changes in demand
Indian Breads Product category covers all these issues
and hence is used on our analysis
The existing solution (GMROI) is not able to estimate the future demand which results in understocking /
overstocking problem. Hence, we have implemented Newsvendor model in conjunction with GMROI
model for better order estimation
• Implement Newsvendor model along with the previously existing GMROI model for better demand estimation
• There is loss of sales and business due to
products running out of stock
• The current solution (GMROI) in place does
not provides any insight about the future
demand
• Products are either overstocked or under
stocked
• The current mechanism for ordering is a
reactive system
Findings Insights
Recommendation
Current approach is based upon GMROI model which takes into account gross profit and stock in hand. It
lacks forecasting capabilities and hence resulted in widening the sales & stock gap
Unable to forecast
the right quantity
Get me sales data
find probability
distribution
Sales – Demand Harmony
Generate sales
forecast
Woo hoo!!
Newsvendor Model1
Newsvendor Model
Our implementation of the Newsvendor model in excel
Total profit = profit from sales - loss from excess stock
Profit from sales = Minimum(supply , demand)*Marginal profit
Loss from excess = Maximum(0,supply - demand)*Marginal cost
Bins Frequency Probability
16.0 - 23.3 3 0.15
23.3 - 30.6 7 0.35
30.6 - 37.9 6 0.3
37.9 - 45.1 1 0.05
45.1 - 52.4 2 0.1
52.4 - 59.7 0 0
59.7 - 67.0 1 0.05
Model in Excel2
Action Items for the future
The current implementation of the Newsvendor model is static. We need
to come up with a dynamic Excel – VBA based tool which is user friendly
Next Steps
Develop an integrated GMROI + Newsvendor tool which can perform both
of these tasks at the same time
Future Plan
Appendix
Few more insights about Indian Bread category
Product Unit Sales
Aman Chapatti 30pcs 1,454
Kawan Chapatti 30pcs 1,124
Deep Paneer Paratha 13oz 572
HR Aloo Paratha 400Gm 441
Fresca UnCk Flr Torti-44 78oz 397
Vendor Unit Sales
HR 3,502
Deep 2,865
Kawan 2,091
Aman 2,054
Ashoka 747
Thanks for your patience!!

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Retail store inventory optimization

  • 1. Team 1 Cohort A Chidambara N Gopal Ganapriya Kalavagunta Sang Yung Lee Shashank Sharma SCM 517: Team Project Inventory Optimization for Bharat Bazaar
  • 2. Problem statement The story so far Cause and effect analysis Findings, Insights and Recommendations GMROI Approach Newsvendor model Action Items for Future Agenda
  • 3. Bharat Bazaar is currently losing customers due to the unavailability of the products. Bharat Bazaar needs a tool or forecasting mechanism which can provide some reliable estimate for the demand of products in near future Situation • Bharat Bazaar is a Indian grocery store selling Indian food products and groceries. It primarily caters to the demand of the ASU Students and residents near Tempe Campus • Bharat Bazaar is facing loss of sales due to unavailability of the products. The unavailability is primarily due to: ̶ FDA and Customs regulations ̶ Transportation and Supply issues ̶ Unforeseen Demand Complications • Bharat Bazaar is facing problems managing its inventory. Often the products are either understocked or overstocked • The current solution in place doesn’t provide good visibility for the demand in the near future Questions • How can Bharat Bazaar estimate the demand for the near future so that the orders for the products and groceries can be placed in advance? • Can this solution be integrated with the current solution (GMROI tool) already in place? We need to develop a forecasting tool for Bharat Bazaar which can be used in conjunction with the GMROI tool which is currently being used to place orders for the various products.
  • 4. Bharat Bazaar • Customs and FDA • Transportation and Availability • Loss of business / customers due to unavailability of the products Worried ClientMy products are not here  Competitor 1 Competitor 2 Competitor 3 Use GMROI The Story so far1
  • 5. Root causes like Manufacturer delay, FDA, Customs and Transportation costs are out of our control. We addressed issues related to forecasts and inventory which were resulting in loss of customers and profit Cause and Effect2 Out of our Scope In Scope When a product goes out of stock, customer goes to the competitors looking for the same product. Inefficient inventory management leads to high storage cost, understocking / Overstocking causing decline in profits
  • 6. GMROI model tells you what to order but fails in estimating the demand There is a requirement of a stochastic estimation system to predict the changes in demand Indian Breads Product category covers all these issues and hence is used on our analysis The existing solution (GMROI) is not able to estimate the future demand which results in understocking / overstocking problem. Hence, we have implemented Newsvendor model in conjunction with GMROI model for better order estimation • Implement Newsvendor model along with the previously existing GMROI model for better demand estimation • There is loss of sales and business due to products running out of stock • The current solution (GMROI) in place does not provides any insight about the future demand • Products are either overstocked or under stocked • The current mechanism for ordering is a reactive system Findings Insights Recommendation
  • 7. Current approach is based upon GMROI model which takes into account gross profit and stock in hand. It lacks forecasting capabilities and hence resulted in widening the sales & stock gap Unable to forecast the right quantity
  • 8. Get me sales data find probability distribution Sales – Demand Harmony Generate sales forecast Woo hoo!! Newsvendor Model1 Newsvendor Model
  • 9. Our implementation of the Newsvendor model in excel Total profit = profit from sales - loss from excess stock Profit from sales = Minimum(supply , demand)*Marginal profit Loss from excess = Maximum(0,supply - demand)*Marginal cost Bins Frequency Probability 16.0 - 23.3 3 0.15 23.3 - 30.6 7 0.35 30.6 - 37.9 6 0.3 37.9 - 45.1 1 0.05 45.1 - 52.4 2 0.1 52.4 - 59.7 0 0 59.7 - 67.0 1 0.05 Model in Excel2
  • 10. Action Items for the future The current implementation of the Newsvendor model is static. We need to come up with a dynamic Excel – VBA based tool which is user friendly Next Steps Develop an integrated GMROI + Newsvendor tool which can perform both of these tasks at the same time Future Plan
  • 11.
  • 13. Few more insights about Indian Bread category Product Unit Sales Aman Chapatti 30pcs 1,454 Kawan Chapatti 30pcs 1,124 Deep Paneer Paratha 13oz 572 HR Aloo Paratha 400Gm 441 Fresca UnCk Flr Torti-44 78oz 397 Vendor Unit Sales HR 3,502 Deep 2,865 Kawan 2,091 Aman 2,054 Ashoka 747
  • 14. Thanks for your patience!!