Optimizing Inventory Rebalancing: Strategies for Managing Excess Inventory in a Dynamic Supply Chain

Abstract

The increasing demand for faster consumer delivery has led retailers to establish smaller regional distribution centers alongside traditional main distribution centers (MDCs). However, the limited capacity of some of these regional centers heightens the need for precise inventory forecasting and deployment to minimize excess inventory, particularly when few viable outlets exist for excess inventory. This research examines strategies to mitigate excess inventory at regional centers through inventory rebalancing, the integration of additional outlets, and modifications to existing inventory policies. A Monte Carlo simulation was conducted to compare the performance of the current system with a modified system incorporating these enhancements. The results showed that the modified system improved capacity utilization and reduced inventory deployment from the MDC without affecting margin. These improvements can enable more agile operations at smaller regional centers, reduce inventory buildup, and reduce the pressure of precise inventory deployment.