Optimizing New-Vehicle Inventory at General Motors

This paper describes how General Motors (GM) uses operations research to optimize its new-vehicle inventory. The solution answers two complementary questions: (1) what is the optimal number of vehicles to build? and (2) what are the optimal vehicle configurations? To answer the first question, for each vehicle model, we find the inventory that maximizes profit less inventory carrying costs, which differs from the standard approach of finding the inventory needed to satisfy a given fill rate. To answer the second question, we provide a decision support tool to help dealers order the best variations for each vehicle model using a set-covering philosophy, which differs from the standard approach of recommending the highest-selling variants. This paper describes the business processes surrounding these decisions, how the need for implementation and ongoing use guided our solution development, and the impact on the business.