Case Weatherhead paper on inventories takes honors
Authors create winning guidelines for managing multiple sites
November 2, 2004 | For more information: Susan Griffith (216)-368-1004
 A research article from Case Western Reserve University’s Weatherhead School of Management that provides guidelines for how managers can use information systems to keep track inventories to quickly fill customer orders recently earned the Bernard J. La Londe Best Paper Award from the Council of Logistics Management.
 “Planning Multiple Location Inventories” was authored by Ronald H. Ballou, Case professor of operations, and Apostolos N. Burnetas, associate professor of operations at Weatherhead, and was published in the 2003 Journal of Business Logistics. The authors received a $1,000 award during the Logistics Educators Conference on October 3.
The paper was an outgrowth of consulting work in 2002 for a local major manufacturing firm where the researchers observed that orders were filled from multiple inventory stocking locations.
Inventories can be stored in warehouses, plants or retail outlet locations. Where items are stored is usually motivated by maximizing cost savings, demands for products and customer service needs.
“With improvements in business information systems, it has become increasingly popular to treat multiple inventory locations as virtual inventories,” stated the researchers.
In their paper, the authors compared traditional inventory planning with this more virtual approach where customer service needs can be filled from a variety of inventory sources both primary and through a secondary supplier.
“It was clear from the company we studied that the certain decision rules were in place for deciding whether an ordered item should be filled only from its primary stocking location—and backordering if necessary—or cross filled and supplied from a secondary source when the order cannot be filled from the primary source,” said Ballou.
The authors have shown an easy way for managers to decide which items in their inventories are candidates for cross filling, and which are not, in an effort to minimize cost and at the same time maintain a high level of customer service.
They noted that while delivery costs might increase by filling orders from secondary suppliers, “customers actually received fill rates approaching 100 percent even when the product-in-stock probabilities for the individual stocking points were somewhat lower.”
The appeal of this system of tracking inventories from multiple locations is that customers receive their orders while the company kept lower system-wide inventory levels.
The authors also supplied their readers with guidelines on which items are better handled in traditional ways and others in the virtual inventories.
“We created a mixed control strategy for inventoried items,” reported the authors.
The award from the Council of Logistic Management is among a number of honors Ballou has received for his research work. In addition to consulting for more than 60 companies over the past 35 years, Ballou has been a faculty member at Case since 1968.
Burnetas, whose research interests focus on stochastic modeling and optimization, supply chain management and the interface of operations management with finance, has been on the Weatherhead faculty since 1994. He teaches classes in operations management, operations research methods for decision making and probability and stochastic processes.
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