Distributor Cost Inefficiencies from Partial Pallet Ordering

Abstract

Limiting inventory and fulfillment models to unit costs does not reflect current practice at distributors. Storage and material handling costs are appropriately incurred at the pallet level. Growing emphasis on accumulation and repalletization of customer partial pallet order quantities necessitates consideration of the costs of pallet splitting and case picking. Each cost category may contribute to expensive inefficiencies at a distributor. We describe these inefficiencies and suggest their use in developing customer cost premiums.