Case Study: Packing and Distribution Logistics Optimization of Fashion Goods

Abstract

In this short paper, we describe the development and implementation of the optimal packing and distribution of fashion products applied to a leading outdoor fashion brand in South Korea, Kolon Sport (K/S), through the academic-industry Business Analytics project with KAIST. We explain the framework of Business Analytics defined for the project and how modeling and analysis were performed under the framework. The packing and distribution decision involves how to determine a set of different box configurations and how to distribute these boxes to stores to meet store demand. The packing and distribution problem was formulated as a mixed-integer linear program, and a solution approach was developed to efficiently solve the industry-size problem in a timely manner. The modeling and analysis were performed with SAS packages. In particular, the optimization model was implemented with SAS/OR. The proposed approach was validated with simulation and on-site pilot test. The simulation showed an improvement in the packing and distribution process of around 15% in terms of meeting the demand in the stores, and it projected a 5 similar to 10% improvement in revenue. After the successful pilot test, the approach was implemented in the internal IT system of K/S in July 2015. Consequently, the mass-produced items for the fall/winter season of 2015 were distributed by the system.