INDUSTRIAL ENGINEERING APPLICATIONS IN RETAILING:HOW BOB GOT HIS BOOK

By -

HOW BOB GOT HIS BOOK

Bob decides that he needs a copy of Gordon MacKenzie’s Orbiting the Giant Hairball, published in 1996 by Penguin Books. He gets in his car and drives to the local book superstore. After unsuc- cessfully searching in the superstore for the book, then someone to ask about the book, Bob gets a Starbucks and goes to the smaller chain bookstore in the nearby mall. As it turns out, this store does not have the book either, but the employee says he thinks they can get it for him—but cannot tell him for sure when. Frustrated with both stores, yet very satisfied with the Starbucks, he drives home.

At home, Bob decides that he will check Amazon.com. Within two clicks, he finds that Orbiting can be sent within 24 hours and at 30% off the price at the superstore. Bob also sees that it has a five-star rating and is one of the most popular purchases at Nike and Ernst & Young (not bad company, he thinks). Finally, he reads a review from a reader that says the following, ‘‘Here is the passage that was on his funeral leaflet (it seems that Mr. McKenzie has recently died): ‘You have a masterpiece inside you, too, you know. One unlike any that has ever been created, or ever will be. And remember: If you go to your grave without painting your masterpiece, it will not get painted. No one else can paint it. Only you.’ ’’ Taken by this statement, Bob decides the book may be better than he heard and orders five copies (one to keep and four to give away). He clicks and within 30 minutes receives an e-mail notification that the order was received. The next day he receives an e- mail notification that the order was shipped. In three days, he receives the package from Amazon. That night he reads the book, finds it to be a great book on leadership, and orders 20 more from Amazon to give out as Christmas gifts. Thinking about the experience, Bob concludes that there may be no reason to ever go to a book store again (except for the Starbucks).

Superstore bookstores stock many single copies of books that sell infrequently and multiple copies of books that sell quickly. They have a sophisticated sales / inventory system so books can be replaced rather quickly from regional distribution centers. Each of the superstores has 130,000 different books, about 10 checkout lines, and a staff of about 20 working in the stores at any one time. When Bob went to purchase Orbiting and it was not there, there was no system or person who was able to tell Bob if they could get it to him in a reasonable amount of time. It seems that this superstore doesn’t care that Bob did not get his book. These stores are profitable carrying a large inventory with many popular books. The lifetime value of Bob’s business does not seem to be important to them.

When Bob goes to Amazon.com, he is welcomed as a regular client and asked if he wants to see some recommendations. (Most of the time he clicks ‘‘yes’’ and purchases a book or two he had not heard of, maybe a new book from an author he likes, and maybe a CD that he did not know about.) This time he simply typed in the name of the book he wanted and clicked on a button at the bottom of the page that tells Amazon.com how Bob wants to pay for the book and where to ship it based upon his previous orders. Amazon then assigned the order to one of its seven U.S. distribution centers (five have opened in 1999—Amazon has 3 million square feet of floor space) that had the book. A red light on a shelf where the book was stored automatically goes off. Workers move from bulb to bulb, retrieving the items ordered then pressing a button to turn off the light. Computers determine which rows the workers go to. Bob’s order is placed in a moving crate that contains any number of orders. The crate moves along at 2.9 ft per sec through 10 miles of conveyor. Machines and workers (all of whom get Amazon stock options by the way) scan the bar codes on the items at least 15 times. At the end of the trail, the bar-coded books get matched with the orders. Bob’s book goes down a three-foot chute to a box with a bar code that identifies the order. The box is packed, weighed, and labeled before leaving the warehouse in a truck. One of Amazon’s newest facilities, in Mc- Donough, Georgia, can ship as many as 200,000 boxes a day. One to seven days later, Bob is another one of over 13 million customers satisfied with Amazon.

The moral of the story—Bob really didn’t care if the companies cared or what they had to go through to get the book to him. HE JUST WANTED THE BOOK.

Comments

Post a Comment

Popular posts from this blog

DUALITY THEORY:THE ESSENCE OF DUALITY THEORY

By -
Image
THE ESSENCE OF DUALITY THEORY Given our standard form for the primal problem at the left (perhaps after conversion from another form), its dual problem has the form shown to the right. Thus, with the primal problem in maximizatio n form, the dual problem is in minimization form instead. Furthermore, the dual problem uses exactly the same pa r amete r s as the primal problem, but in different locations, as summarized below. 1. The coefficients in the objective function of the primal problem are the right-hand sides of the functional constraints in the dual problem. 2. The right-hand sides of the functional constraints in the primal problem are the coef- ficients in the objective function of the dual problem. 3. The coefficients of a variable in the functional constraints of the primal problem are the coefficients in a functional constraint of the dual problem. To highlight the comparison, now look at these same two problems in matrix notation (as introduced at the beginn...
Read more

NETWORK OPTIMIZATION MODELS:THE MINIMUM SPANNING TREE PROBLEM

By -
Image
THE MINIMUM SPANNING TREE PROBLEM The minimum spanning tree problem bears some similarities to the main version of the shortest-path problem presented in the preceding section. In both cases, an undi r ecte d and connected network is being considered, where the given information includes some mea- sure of the positive length (distance, cost, time, etc.) associated with each link. Both problems also involve choosing a set of links that have the shortest total length among all sets of links that satisfy a certain property. For the shortest-path problem, this property is that the chosen links must provide a path between the origin and the destination. For the minimum spanning tree problem, the required property is that the chosen links must provide a path between ea c h pair of nodes. The minimum spanning tree problem can be summarized as follows: 1. You are given the nodes of a network but not the links. Instead, you are given the po- tential links and the positive length for each ...
Read more

INTEGER PROGRAMMING:THE BRANCH-AND-CUT APPROACH TO SOLVING BIP PROBLEMS

By -
TH E BRANCH-AND-CUT APPROACH TO SOLVING BIP PROBLEMS Integer programming has been an especially exciting area of OR since the mid-1980s be- cause of the dramatic progress being made in its solution methodology. Background To place this progress into perspective, consider the historical background. One big break- through had come in the 1960s and early 1970s with the development and refinement of the branch-and-bound approach. But then the state of the art seemed to hit a plateau. Rel- atively small problems (well under 100 variables) could be solved very efficiently, but even a modest increase in problem size might cause an explosion in computation time be- yond feasible limits. Little progress was being made in overcoming this exponential growth in computation time as the problem size was increased. Many important problems arising in practice could not be solved. Then came the next breakthrough in the mid-1980s, with the introduction of the b r an c h- and-cu t approach to sol...
Read more