Minimum Order Quantity Model for a CPG Company
Open Access
- Author:
- Hooker, Rachel Natalie
- Area of Honors:
- Supply Chain and Information Systems
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Robert Alexander Novack, Thesis Supervisor
John C Spychalski, Thesis Honors Advisor - Keywords:
- supply chain
minimum order quantity
distribution
order fulfillment
excel model
model - Abstract:
- Minimum order quantities (MOQs) have long been set by suppliers to ensure high and steady volume orders and efficient use of their manufacturing production lines. With many consumer packaged goods (CPG) companies turning to vendor-managed inventory systems to influence order quantities they ship to their retailers, the CPG companies focus on providing high service levels for these retail customers. This thesis explores the idea of adopting the minimum order quantities concept in the distribution and order fulfillment side of the supply chain. This thesis describes the process of building a model for a Fortune 500 consumer packaged goods company, Company A, to find optimal order quantities for each stock-keeping unit (SKU). Utilizing the data set and cost rates provided by Company A, interviews with Company A’s employees, a literature review, and Excel, a model was constructed that recommends a specific minimum order quantity to set for each SKU sent to Company A’s main customer, Wholesaler B. This scenario analysis model shows associated operational costs by shipping various order quantities. The results of this thesis inform Company A of potential cost savings achieved by utilizing the recommended minimum order quantity output from the model as opposed to using Company A’s current method to determine order shipment quantities to Wholesaler B. The overall takeaway of this model and thesis is the idea that shipping larger quantity orders less frequently can reap distribution operations cost savings for vendor-managing organizations like Company A and their customers by setting minimum order quantities with customers.