Date of Award

Summer 2019

Document Type

Thesis

Degree Name

Master of Science in Industrial Engineering - (M.S.)

Department

Mechanical and Industrial Engineering

First Advisor

Sanchoy K. Das

Second Advisor

Athanassios K. Bladikas

Third Advisor

Sevilay Onal

Abstract

For large e-commerce companies such as Amazon, when an order comes, this order might be available at more than one fulfillment centers. Therefore, the question of which fulfillment center this order should be fulfilled from would arise.

In a typical situation, customer demand is fulfilled from the closest fulfillment center. However, this approach does not always provide the optimal solution since there are so many factors that could be involved in making such a decision. These factors might include inventory balance, product correlations, and future demand.

Our decision model focuses on putting future orders in consideration while assigning orders to fulfillment centers. In order to get insights about future demand and orders, using historical data to forecast future orders is used. Different forecasting methods are used for different demand behaviors and different types of products. The objective of this thesis is to showcase the importance of considering future demand while assigning current demand to fulfillment centers and its effect on the total shipping cost.

We propose that for a singular product, when demand is uniformly distributed, and the total inventory level is higher than the current and expected demand, including future orders in consideration while allocating current orders would result in changing the allocation and reduce the total shipping costs when the right forecasting method is used.

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