Vol. 41, No. 5, September–October 2011, pp. 466–484 issn 0092-2102  eissn 1526-551X  11  4105  0466 http://dx.doi.org/10.1287/inte.1110.0582 © 2011 INFORMS A Short-Range Scheduling Model for Blockbuster’s Order-Processing Operation Casey Chung, Milind Dawande, Divakar Rajamani, Chelliah Sriskandarajah School of Management, The University of Texas at Dallas, Richardson, Texas 75080 {casey_chung@msn.com, milind@utdallas.edu, divakar@utdallas.edu, chelliah@utdallas.edu} Blockbuster Inc., a chain of VHS, DVD, Blu-ray, and video game rental stores, has developed a highly specialized distribution network. The company maintains a single distribution center in which it receives products from suppliers, and processes and packs them for shipping to stores across the United States. The volumes of partic- ular products and the number of different products shipped in a week have significant week-to-week volatility. Short lead times are typical because of supplier manufacturing delays and strict in-store due-date requirements. At the distribution center, processing and packing are scheduled through multiple processing departments that compete for use of shared merge conveyors and shared sortation systems. Blockbuster’s general processing and packing goal is on-time delivery of products to stores while controlling costs. In this paper, we describe the development and implementation of a mixed-integer programming model to schedule Blockbuster’s short-range order-processing operations. Implemented beginning in January 2007, the model has helped Blockbuster to maintain timely shipping, reduce related labor and transportation costs, improve capacity utilization, and attain a better understanding of how to achieve further improvements. Block- buster’s structure, in which multiple processing departments compete for subsequent shared resources, such as merge conveyors and sortation systems, is common in other industries; therefore, we also discuss the relevance of this model to other organizations. Key words : industries: entertainment, service; short life cycle products; scheduling; integer programming. I n fiscal year (FY) 2008, Blockbuster, a chain of VHS, DVD, Blu-ray, and video game rental stores, had more than 7,800 stores worldwide and over $5.29 billion in annual revenue; it had over 4,800 stores and over $3.9 billion in revenue in the United States (including franchisees). The data used in this paper are specific to the order-processing and distribution operations in the United States and do not include any international activities or online rental business. DVDs and electronic games are characterized by a rapidly decaying life cycle because of the release-date structure imposed by movie studios and the short, active life span inherent in any entertainment media product. Therefore, a majority of rental business cus- tomarily occurs in the first few weeks of a title’s release, with little activity in subsequent weeks. Typ- ically, the only exceptions to this pattern are (1) titles that have a seasonal aspect (e.g., horror movies show increased activity as Halloween approaches), and (2) movies that have complementary titles (e.g., Part 3 of a Star Wars movie causes increased activity for Parts 1 and 2). Because new offerings are released weekly, looking at the industry as having 52 distinct “seasons” is convenient. Historically, although these weekly seasons have virtually no correlation with each other, they have a weak correlation with the calendar seasons. Figure 1 shows the various stages in the life cycle of a typical product that has a theatrical release. Note that the revenue decay curve is approximately exponential for both a theatrical release and a release on DVD. A product’s life cycle can take one of multiple paths depending on the nature of the product. As Figure 2 shows, a product can move from a high- volume new-release title (region I) to a low-volume catalog title (region IV). When seasonal activity and complementary titles are considered, the volume of a product (even an older title) can shift from low to high (region IV to region II). Likewise, some titles might never leave the low-volume range even if they are new releases (region III to region IV). 466