Distribution of Seasonal Inventory of the Hawaiian Pineapple Company

Abstract

This paper describes a program developed for the Hawaiian Pineapple Company, Ltd., to reduce inventory costs incurred in the distribution of canned pineapple products. The Dole plantations harvest about 75 per cent of their total annual crop during the five summer months, thus creating large canned goods inventories. These inventories are stored in the Company's Honolulu warehouse and at commercial warehouses on the U.S. mainland. The mainland warehouses store a portion of the seasonal inventories and also provide forward supply points for the Company's buyers, but at considerable expense. An inventory-control model was developed to determine the required inventory at each warehouse for specified protection against an out-of-stock condition. A procedure was developed for allocating inventories in excess of those needed for immediate sales requirements among the available storage points to minimize the total annual warehousing cost. The procedure takes into account the different storage, handling, and tax costs at the various locations and all relevant operating requirements. The principles involved are explained by a graphical approach, which is easy to understand and which facilitates changing the allocation rules in response to changes in operating conditions. The program has been adopted by the Company's management and steps are in progress to incorporate the recommendations in the Company's inventory distribution operations.