Agarwal Automobiles: Fuel Station Forecasting and Inventory Management

On June 1, 2016 a student was preparing for a summer job with Agarwal Automobiles, a vehicle fuel station owned by his father. The student had taken courses that covered supply chain management, including inventory management and forecasting. His father had suggested that, as a summer project, the student examine the fuel station’s retail inventory management practices with the intention of replacing the current simple rules with a more rational and complex planning model. The student needed some ideas to use as a guide toward a better ordering policy. The available data for the previous six months suggested that the company held an average ending inventory of ?2.1 million worth of fuel products to maintain average daily sales of ?0.52 million. The challenge was to reduce the inventory levels, while maintaining a high customer service level in fuel sales.