物流與供應(yīng)鏈英文

AStrategicFrameworkforSupplyChainDesign,Planning,andOperationSyllabusOutlineWhatissupplychainmanagement?AsupplychainstrategyframeworkSevenElevenJapanTraditionalView:LogisticsintheEconomy(1990,1996)FreightTransportation $352,$455BillionInventoryExpense $221,$311BillionAdministrativeExpense $27,$31BillionLogisticsrelatedactivity 11%,10.5%ofGNP.Source:CassLogisticsTraditionalView:LogisticsintheManufacturingFirmProfit 4%LogisticsCost 21%MarketingCost 27%ManufacturingCost 48%ProfitLogisticsCostMarketingCostManufacturingCostSupplyChainManagement:TheMagnitudeintheTraditionalViewEstimatedthatthegroceryindustrycouldsave$30billion(10%ofoperatingcostbyusingeffectivelogisticsandsupplychainstrategiesAtypicalboxofcerealspends104daysfromfactorytosaleAtypicalcarspends15daysfromfactorytodealershipLauraAshleyturnsitsinventory10timesayear,fivetimesfasterthan3yearsagoSupplyChainManagement:TheTrueMagnitudeCompaqestimatesitlost$0.5billionto$1billioninsalesin1995becauselaptopswerenotavailablewhenandwhereneededWhenthe1gigprocessorwasintroducedbyAMD,thepriceofthe800megprocessordroppedby30%P&Gestimatesitsavedretailcustomers$65millionbycollaborationresultinginabettermatchofsupplyanddemandWhatisasupplychain?CustomerwantsdetergentandgoestoJewelJewelSupermarketJewelorthirdpartyDCP&GorothermanufacturerPlasticProducerChemicalmanufacturer(e.g.OilCompany)TennecoPackagingPaperManufacturerTimberIndustryChemicalmanufacturer(e.g.OilCompany)FlowsinaSupplyChainCustomerInformationProductFundsSupplyChainCycleViewofSupplyChainsCustomerOrderCycleReplenishmentCycleManufacturingCycleProcurementCycleCustomerRetailerDistributorManufacturerSupplierPush/PullViewofSupplyChainsProcurement,ManufacturingandReplenishmentcyclesCustomerOrderCycleCustomerOrderArrivesPUSHPROCESSESPULLPROCESSESExamplesofSupplyChainsDell/CompaqToyota/GM/FordAmazon/Borders/BarnesandNobleWebvan/Peapod/JewelWhataresomekeyissuesinthesesupplychains?WhatisSupplyChainManagement?Managingsupplychainflowsandassets,tomaximizesupplychainsurplus.Whatissupplychainsurplus?TheValueChain:LinkingSupplyChainandBusinessStrategyNewProductDevelopmentMarketingandSalesOperationsDistributionServiceFinance,Accounting,InformationTechnology,HumanResourcesBusinessStrategyNewProductStrategyMarketingStrategySupplyChainStrategyAchievingStrategicFitUnderstandingtheCustomerLotsizeResponsetimeServicelevelProductvarietyPriceInnovationImpliedDemandUncertaintyLevelsofImpliedDemandUncertaintyLowHighPriceResponsivenessCustomerNeedImpliedDemandUncertaintyDetergentLongleadtimesteelHighFashionEmergencysteelUnderstandingtheSupplyChain:Cost-ResponsivenessEfficientFrontierHighLowLowHighResponsivenessCostAchievingStrategicFitImplieduncertaintyspectrumResponsivesupplychainEfficientsupplychainCertaindemandUncertaindemandResponsivenessspectrumZoneofStrategicFitStrategicScopeSuppliersManufacturerDistributorRetailerCustomerCompetitiveStrategyProductDev.StrategySupplyChainStrategyMarketingStrategyDriversofSupplyChainPerformanceEfficiencyResponsivenessInventoryTransportationFacilitiesInformationSupplychainstructureDriversConsiderationsforSupplyChainDriversSupplyChainDecisions:StructuringDriversStrategy(Design)PlanningOperationSyllabusMajorObstaclestoAchievingFitMultipleowners/incentivesinasupplychainIncreasingproductvariety/shrinkinglifecycles/customerfragmentationIncreasingimplieduncertaintyLocaloptimizationandlackofglobalfitDealingwithMultipleOwners/LocalOptimizationInformationCoordinationContractualCoordinationDealingwithProductVariety:MassCustomizationMassCustomizationHighHighLowLowLongShortLeadTimeCostCustomizationFragmentationofMarketsandProductVarietyAretherequirementsofallmarketsegmentsservedidentical?Arethecharacteristicsofallproductsidentical?Canasinglesupplychainstructurebeusedforallproducts/customers?No!Asinglesupplychainwillfaildifferentcustomersonefficiencyorresponsivenessorboth.TailoredLogisticsEachLogisticallyDistinctBusiness(LDB)willhavedistinctrequirementsintermsofInventoryTransportationFacilityInformationKey:Howtogainefficiencieswhiletailoringlogistics?ApplyingtheFrameworktoe-commerce:Whatise-commerce?CommercetransactedovertheInternetIsproductinformationdisplayedontheInternet?IsnegotiationovertheInternet?IstheorderplacedovertheInternet?IstheordertrackedovertheInternet?IstheorderfulfilledovertheInternet?IspaymenttransactedovertheInternet?ExistingChannelsforCommerceProductinformationPhysicalstores,EDI,catalogs,facetoface,……NegotiationFacetoface,phone,fax,sealedbids,……OrderplacementPhysicalstore,EDI,phone,fax,facetoface,…OrdertrackingEDI,phone,fax,…OrderfulfillmentCustomerpickup,physicaldeliveryRevenueImpactofE-CommerceLengthofsupplychainProductinformationTimetomarketNegotiatingpricesandcontracttermsOrderplacementandtrackingOrderfulfillmentPaymentCostImpactofE-CommerceFacilitycostsSiteandprocessingcostInventorycostsCycle,Safety,SeasonalinventoryTransportationcostsInboundandoutboundcostsInformationsharingCoordinationSevenElevenJapanSevenEleven-NumberofStores1999:8,027SevenEleven-NetSalesSevenEleven-PretaxProfitSevenEleven-Inventory(days)JapaneseImagesofSevenElevenConvenientCheerfulandlivelystoresManyreadymadedinneritemsIbuyFamousforitsgreatboxedlunchanddinnerOnweekends,whenIwassingle,IwenttobuylunchanddinnerKeyProductCategoriesProcessedFoods:50%FreshFoods:30%NonFoods:20%StoreDescriptionAveragesize=100sq.m.=1,000sq.ft.(about1/3oftypicalUSstore)Averagesales=700,000Yen(abouttwiceaverageUSstore)SKU’’sofferedinstore:Over3,000(changebytimeofday,dayofweek,season)VirtuallynostoragespaceSupplychainObjectiveMicromatchingofsupplyanddemand(bylocation,timeofday,dayofweek,season)FacilitiesStrategyHavemanyoutlets,atconvenientlocations,closetowherecustomerscanwalkWhentheylocateinaplacetheyblankettheareawithstores;storesopeninclusterswithcorrespondingDC’’s844storesintheTokyoregion;SevenElevenhas5,523storesin21prefecturesInformationStrategyQuickaccesstouptodateinformation(ascontrastswithdata)Highspeeddatanetworklinkingstores,headquarters,DCsandsuppliersStorehardwareStorecomputerPOSregisterslinkedtostorecomputerGraphicOrderTerminalsScannerterminalsforreceivingInformationAnalysisofPOSDataSalesanalysisofproductcategoriesovertimeSKUanalysisAnalysisofwasteordisposalTenday(week)salestrendbySKUSalestrendsfornewproductSalestrendbytimeanddayListofslowmovingitemsContributionofproducttosectionsinstoredisplayDistributionStrategyDeliveryarrivesfromover200plantsDeliveryiscrossdockedatDC(over80DCsforfood)FoodDCsstorenoinventoryCombineddeliverysystem:frozenfoods,chilledfoods,roomtemperatureandhotfoods11truckvisitsperstoreperday(comparedto70in1974)Nosupplier(notevencoke!)deliversdirectTheFuture7-elevengrowingrapidlyintheUS7-elevenaimstobeawebdepotinboththeUSandJapan.Doesthismakesensefromasupplychainperspective?SummaryTwoviewsofasupplychainAstrategicframework:Achievingfit-Efficiency/ResponsivenessandSupplychaindriversTailoredlogisticsE-commerceframework7-eleven47PlanningDemandandSupplyinaSupplyChainForecastingandAggregatePlanning48LearningObjectivesPhasesofsupplychaindecisionsIdentifycomponentsofademandforecastTimeseriesforecastingEstimateforecasterrorAggregateplanninginthesupplychain49SupplyChainDecisionsStrategyordesign:ForecastPlanning:ForecastOperationActualdemandProduction:Scheduling,inventorycontrol,aggregateplanningMarketing:Sales-forceallocation,promotion,newproductintroductionFinance:Plant/equipmentinvestment,budgetaryplanningPersonnel:Workforceplanning,hiring,layoffs50CharacteristicsofforecastsForecastsarealwayswrong.Shouldincludeexpectedvalueandmeasureoferror.Long-termforecastsarelessaccuratethanshort-termforecasts:ForecasthorizonAggregateforecastsaremoreaccuratethandisaggregateforecasts51DemandForecastInvolveFactors:PastdemandPlannedadvertisingormarketingeffortsDisplaypositioninacatalogStateoftheeconomyPlannedpricediscountsActionscompetitorshavetaken52ForecastingMethodsQualitative:Subjective,humanjudgmentLittlehistoricaldataExpertshavemarketintelligenceTimeSeries:PastdemandhistoryisagoodindicatoroffuturedemandStatic;AdaptiveCausal:CorrelationbetweendemandandenvironmentfactorsSimulation:Imitatethecustomerchoices53BasicApproachtoDemandForcastingUnderstandtheobjectiveofforecastingIntegratedemandplanningandforecastingIdentifythemajorfactorsthatinfluencethedemandforecastUnderstandandidentifycustomersegmentsDeterminetheappropriateforecastingtechniqueEstablishperformanceanderrormeasuresfortheforecast54ComponentsofanobservationObserveddemand(O)=Systematiccomponent(S)+Randomcomponent(R)Multiplicative:S=L×T×seasonalfactorAdditive:S=L+T+SeasonalfactorMixed:S=(L+T)×seasonalfactorLevel(currentdeseasonalizeddemand)Trend(growthordeclineindemand)Seasonality(predictableseasonalfluctuation)55TimeSeriesForecastingForecastdemandforthenextfourquarters.56TimeSeriesForecasting57ForecastingmethodsStaticAdaptiveMovingaverageSimpleexponentialsmoothingHolt’smodel(withtrend)Winter’’smodel(withtrendandseasonality)58S=（（L+T）×SeasonalityL=Estimateoflevelforperiod0;T=Estimateoftrend(perperiod);St=EstimateofseasonalfactorforperiodtDt=ActualdemandobservedinperiodtFt=ForecastofdemandforperiodtFt+l=[L+(t+l)T]St+lStaticForecastingmethods59ForpevenForpoddP:periodicityEstimatingLevel:deseasonalizeddemand60P=4,t=3ExampleExcelFile61LinearRegression62EstimatingSeasonalFactorSeasonalCycles63ForecastfortheNextFourQuarters64AdaptiveForecastingmethodsLt=Estimateoflevelattheendofperiodt;Tt=Estimateoftrendattheendofperiodt;St=Estimateofseasonalfactorforperiodt;Ft=Forecastofdemandforperiodt(forperiod<t);Dt=Actualdemandobservedinperiodt;Et=Forecasterrorobservedinperiodt;At=Absolutedeviationforperiodt=|Et|)65Initialize:L0T0S0；ForecastEstimateerrorModifyestimateFourSteps66Systematiccomponent=Level;MovingAverage67SimpleExponentialSmoothingSystematiccomponent=Level;68Trend-CorrectedExponentialSmoothing(Holt’sModel)Systematiccomponentofdemand=Level+trend;69Systematiccomponentofdemand=(Level+Trend)××SeasonalfactorTrend-andSeasonality-CorrectedExponentialSmoothing(Winter’sModel)70Errormeasures71ForecastingMethodMADMAPE(%)TSRangeMovingaverage9,71949-1.52to2.21Simpleexponentialsmoothing10,20859-1.38to2.25Holt’smodel8,83652-1.90to2.00Winter’smodel1,4698-2.74to4.00NATURALGAS.com72AggregatePlanningatRedTomatoTools73FundamentaltradeoffsinAggregatePlanningCapacity(regulartime,overtime,subcontract)InventoryBacklog/lostsalesBasicStrategiesChasestrategyTimeflexibilityfromworkforceorcapacityLevelstrategy74AggregatePlanning75AggregatePlanning(DefineDecisionVariables)WtHtLtPtItStCtOt=Workforcesizeformontht,t=1,...,6=Numberofemployeeshiredatthebeginningofmontht=Numberofemployeeslaidoffatthebeginningofmontht=Productioninmontht=Inventoryattheendofmontht=Numberofunitsstockedoutattheendofmontht=Numberofunitssubcontractedformontht=Numberofovertimehoursworkedinmontht,76AggregatePlanning(DefineObjectiveFunction))77AggregatePlanning(DefineConstraintsLinkingVariables)Workforcesizeforeachmonthisbasedonhiringandlayoffs78AggregatePlanning(Constraints)Productionforeachmonthcannotexceedcapacity79AggregatePlanning(Constraints)Inventorybalanceforeachmonth80AggregatePlanning(Constraints)OvertimeforeachmonthExcelFile81ScenariosIncreaseinholdingcost(from$2to$6)Overtimecostdropsto$4.1perhourIncreaseddemandfluctuation82IncreasedDemandFluctuation83ManagingPredictableVariabilityManageSupplyManagecapacityTimeflexibilityfromworkforce(OTandotherwise)UseofseasonalworkforceUseofsubcontractingUseofdualfacilities-dedicatedandflexibleDesigningproductflexibilityintotheproductionprocessesManageinventoryComponentcommonalitySeasonalinventoryofpredictableproducts84ManagingPredictableVariabilityManagedemandwithpricingOriginalpricing:Cost=$422,275,Revenue=$640,000DemandincreasefromdiscountingMarketgrowthStealingmarketshareForwardbuyingDiscountof$1increasesperioddemandby10%andmoves20%ofnexttwomonthsdemandforward85Off-Peak(January)Discountfrom$40to$39Cost=$421,915,Revenue =$643,400,Profit=$221,48586Peak(April)Discountfrom$40to$39Cost=$438,857,Revenue =$650,140,Profit=$211,28387DemandManagementPricingandAggregatePlanningmustbedonejointlyFactorsaffectingdiscounttimingProductMargin:Impactofhighermargin($40insteadof$31)Consumption:Changingfractionofincreasecomingfromforwardbuy(100%increaseinconsumptioninsteadof10%increase)Forwardbuy88PerformanceUnderDifferentScenarios89FactorsAffectingPromotionTiming90SummaryofLearningObjectivesForecastingAggregateplanningSupplyanddemandmanagementduringaggregateplanningwithpredictabledemandvariationSupplymanagementleversDemandmanagementlevers91FactorsInfluencingDiscountTimingImpactofdiscountonconsumptionImpactofdiscountonforwardbuyProductmargin92Inventory/CapacitytradeoffLevelingcapacityforcesinventorytobuildupinanticipationofseasonalvariationindemandCarryinglowlevelsofinventoryrequirescapacitytovarywithseasonalvariationindemandorenoughcapacitytocoverpeakdemandduringseason93JanuaryDiscount:100%increaseinconsumption,saleprice=$40($39)Offpeakdiscount:Cost=$456,750,Revenue=$699,56094Peak(April)Discount:100%increaseinconsumption,saleprice=$40($39)Peakdiscount:Cost=$$536,200,Revenue=$783,52012/31/202295PlanningandManagingInventoriesinaSupplyChainOptimalMatchingofSupplyandDemand12/31/202296OutlineTheroleofinventoryinthesupplychainWhyholdinventory?EconomiesofscaleBatchsizeandcycletimeQuantitydiscountsShorttermdiscounts/TradepromotionsStochasticvariabilityofsupplyanddemandEvaluatingservicelevelgivensafetyinventoryEvaluatingsafetyinventorygivendesiredservicelevelLeverstoimproveperformance12/31/202297RoleofInventoryintheSupplyChainOverstocking:AmountavailableexceedsdemandLiquidation,Obsolescence,HoldingUnderstocking:DemandexceedsamountavailableLostmarginandfuturesalesGoal:Matchingsupplyanddemand12/31/202298RoleofInventoryintheSupplyChainCostAvailabilityEfficiencyResponsiveness12/31/202299Whyholdcycleinventory?EconomiesofscaleFixedcostsassociatedwithlotsQuantitydiscountsTradePromotions12/31/2022100Fixedcosts:OptimalLotSizeandReorderInterval(EOQ)R: AnnualdemandS: SetuporOrderCostC: Costperunith: HoldingcostperyearasafractionofproductcostH: HoldingcostperunitperyearQ: LotSizeT: Reorderinterval12/31/2022101ExampleDemand,R=12,000computersperyearUnitcost,C=$500Holdingcost,h=0.2Fixedcost,S=$4,000/orderQ=980computersCycleinventory=Q/2=490Flowtime=Q/2R=0.49monthReorderinterval,T=0.98month12/31/2022102KeyPointsfromBatchingIndecidingtheoptimallotsizethetradeoffisbetweensetup(order)costandholdingcost.Ifdemandincreasesbyafactorof4,itisoptimaltoincreasebatchsizebyafactorof2andproduce(order)twiceasoften.Cycleinventory(indaysofdemand)shoulddecreaseasdemandincreases.Iflotsizeistobereduced,onehastoreducefixedordercost.Toreducelotsizebyafactorof2,ordercosthastobereducedbyafactorof4.12/31/2022103StrategiesforreducingfixedcostsWal-Mart:3dayreplenishmentcycleSevenElevenJapan:MultipledailyreplenishmentP&G:MixedtruckloadsEffortsrequiredin:Transportation(Crossdocking)InformationReceivingAggregateacrossproducts,supplypoints,ordeliverypoints.12/31/2022104LotSizingwithMultipleProductsDemandperyearRL=12,000;RM=1,200;RH=120Commontransportationcost,S=$4,000ProductspecificordercostsL=$1,000;sM=$1,000;sH=$1,000Holdingcost,h=0.2UnitcostCL=$1,000;CM=$1,000;CH=$1,00012/31/2022105DeliveryOptionsNoAggregation:EachproductorderedseparatelyCompleteAggregation:AllproductsdeliveredoneachtruckTailoredAggregation:Selectedsubsetsofproductssoneachtruck12/31/2022106NoAggregation:OrdereachproductindependentlyTotalcost=$155,14012/31/2022107CompleteAggregation:OrderallproductsjointlyAnnualordercost=9.75××$7,000=$68,250Annualtotalcost=$136,52812/31/2022108TailoredAggregation:OrderingSelectedSubsetsStep1:IdentifymostfrequentlyorderedproductStep2:IdentifyfrequencyofotherproductsasamultipleStep3:RecalculateorderingfrequencyofmostfrequentlyorderedproductStep4:Identifyorderingfrequencyofallproducts12/31/2022109TailoredAggregation:OrderselectedsubsetsAnnualordercost=$61,560Totalannualcost=$131,00412/31/2022110Impactofproductspecificordercost12/31/2022111LessonsFromAggregationAggregationallowsfirmtolowerlotsizewithoutincreasingcostCompleteaggregationiseffectiveifproductspecificfixedcostisasmallfractionofjointfixedcostTailoredaggregationiseffectiveifproductspecificfixedcostislargefractionofjointfixedcost12/31/2022112QuantityDiscountsLotsizebasedAllunitsMarginalunitVolumebasedHowshouldbuyerreact?Whatareappropriatediscountingschemes?12/31/2022113All-UnitQuantityDiscountsCost/Unit$3$2.96$2.92OrderQuantity5,00010,000OrderQuantity5,00010,000TotalMaterialCost12/31/2022114All-UnitQuantityDiscountsEvaluateEOQforpriceinrangeqitoqi+1IfqiEOQ<qi+1,evaluatecostoforderingEOQIfEOQ<qi,evaluatecostoforderingqiIfEOQqi+1,evaluatecostoforderingqi+1Evaluateminimumcostoverallpriceranges12/31/2022115MarginalUnitQuantityDiscountsCost/Unit$3$2.96$2.92OrderQuantity5,00010,000OrderQuantity5,00010,000TotalMaterialCost12/31/2022116Marginal-UnitQuantityDiscountsEvaluateEOQforpriceinrangeqitoqi+1IfqiEOQ<qi+1,evaluatecostoforderingEOQIfEOQ<qi,evaluatecostoforderingqiIfEOQqi+1,evaluatecostoforderingEvaluateminimumcostoverallpriceranges12/31/2022117WhyQuantityDiscounts?CoordinationinthesupplychainCommodityproductsProductswithdemandcurve2-parttariffsVolumediscounts12/31/2022118CoordinationforCommodityProductsR=120,000bottles/yearSR=$100,hR=0.2,CR=$3SS=$250,hS=0.2,CS=$2Retailer’soptimallotsize=6,324bottlesRetailercost=$3,795;Suppliercost=$6,009Supplychaincost=$9,80412/31/2022119CoordinationforCommodityProductsWhatcanthesupplierdotodecreasesupplychaincosts?Coordinatedlotsize:9,165;Retailercost=$4,059;Suppliercost=$5,106;Supplychaincost=$9,165.EffectivepricingschemesAllunitquantitydiscount$3forlotsbelow9,165$2.9978forlotsof9,165ormorePasssomefixedcosttoretailer(enoughthatheraisesordersizefrom6,324to9,165)12/31/2022120QuantityDiscountsWhenFirmhasMarketPowerNoinventoryrelatedcostsDemandcurve360,000-60,000pWhataretheoptimalpricesandprofitsinthefollowingsituations:ThetwostagescoordinatethepricingdecisionPrice=$4,Profit=$240,000,Demand=120,000ThetwostagesmakethepricingdecisionindependentlyPrice=$5,Profit=$180,000,Demand=60,00012/31/2022121TwoPartTariffsandVolumeDiscountsDesignatwo-parttariffthatachievesthecoordinatedsolution.Designavolumediscountschemethatachievesthecoordinatedsolution.ImpactofinventorycostsPassonsomefixedcostswithabovepricing12/31/2022122LessonsFromDiscountingSchemesLotsizebaseddiscountsincreaselotsizeandcycleinventoryinthesupplychainLotsizebaseddiscountsarejustifiedtoachievecoordinationforcommodityproductsVolumebaseddiscountswithsomefixedcostpassedontoretaileraremoreeffectiveingeneralVolumebaseddiscountsarebetteroverrollinghorizon12/31/2022123ShortTermDiscountingQ*:NormalorderquantityC:Normalunitcostd:ShorttermdiscountR:Annualdemandh:Costofholding$1peryearQd:ShorttermorderquantityForwardbuy=Qd-Q*12/31/2022124ShortTermDiscounts:ForwardbuyingNormalordersize,Q*=6,324bottlesNormalcost,C=$3perbottleDiscountpertube,d=$0.15Annualdemand,R=120,000Holdingcost,h=0.2Qd=Forwardbuy=12/31/2022125PromotionpassthroughtoconsumersDemandcurveatretailer:300,000-60,000pNormalsupplierprice,CR=$3.00Optimalretailprice=$4.00Customerdemand=60,000Promotiondiscount=$0.15Optimalretailprice=$3.925Customerdemand=64,500Retaileronlypassesthroughhalfthepromotiondiscountanddemandincreasesbyonly7.5%12/31/2022126WeeklyConsumptionofChickenNoodleSoup12/31/2022127WeeklyShipmentsofChickenNoodleSoup12/31/2022128TradePromotionsGoalistodiscourageforwardbuyinginthesupplychainCountermeasuresEDLPScanbasedpromotionsCustomercoupons12/31/2022129LeverstoReduceLotSizesWithoutHurtingCostsCycleInventoryReductionReducetransferandproductionlotsizesAggregatefixedcostacrossmultipleproducts,supplypoints,ordeliverypointsArequantitydiscountsconsistentwithmanufacturingandlogisticsoperations?VolumediscountsonrollinghorizonTwo-parttariffAretradepromotionsessential?EDLPBaseonsell-thruratherthansell-in12/31/2022130WhyholdSafetyInventory?DemanduncertaintySupplyuncertaintyMeasuresofproductavailabilityProductfillrate(fr)OrderfillrateCycleservicelevel(CSL)12/31/2022131ReplenishmentpoliciesWhentoreorder?Howmuchtoreorder?ContinuousReview:OrderfixedquantitywhentotalinventorydropsbelowReorderPoint(ROP)PeriodicReview:OrderatfixedtimeintervalstoraisetotalinventorytoOrderuptoLevel(OUL)12/31/2022132ContinuousReviewPolicy:SafetyInventoryandCycleServiceLevelL: LeadtimeforreplenishmentR: AveragedemandperunittimeR:StandarddeviationofdemandperperiodRL:MeandemandduringleadtimeL:StandarddeviationofdemandduringleadtimeCSL:Cycleservicelevelss: SafetyinventoryROP:ReorderpointAverageInventory=Q/2+ss12/31/2022133Example8.1(ContinuousReviewPolicy)R=2,500/week;R=500L=2weeks;Q=10,000;ROP=6,000ss=ROP-RL=AverageInventory=AverageFlowTime=Cycleservicelevel,CSL=F(RL+ss,RL,L)=12/31/2022134Example8.2:EvaluatingSafetyInventoryGivenCSLR=2,500/week;R=500L=2weeks;Q=10,000;CSL=0.90ss=FS-1(CSL)L=ROP=FactorsdrivingsafetyinventoryReplenishmentleadtimedemanduncertainty12/31/2022135FillRateProportionofcustomerdemandsatisfiedfromstockESCistheexpectedshortagepercyclessisthesafetyinventoryQistheorderquantityESC=-ss{1-NORMDIST(ss/L,0,1,1)}+LNORMDIST(ss/L,0,1,0)12/31/2022136Example8.2:EvaluatingFillRatess=1,000,Q=10,000,FillRate(fr)=?ESC=-ss{1-NORMDIST(ss/L,0,1,1)}+LNORMDIST(ss/L,0,1,0)=-1,000{1-NORMDIST(1,000/707,0,1,1)}+707NORMDIST(1,000/707,0,1,0)=25.13fr=(Q-ESC)/Q=(10,000-25.13)/10,000=0.9975.12/31/2022137EvaluatingSafetyInventoryGivenDesiredFillRateIfdesiredfillrateisfr=0.975,howmuchsafetyinventoryshouldbeheld?ESC=(1-fr)Q=250Solve12/31/2022138EvaluatingSafetyInventoryGivenFillRate12/31/2022139FactorsAffectingFillRateSafetyinventory:Fillrateincreasesifsafetyinventoryisincreased.Thisalsoincreasesthecycleservicelevel.Lotsize:Fillrateincreasesonincreasingthelotsizeeventhoughcycleserviceleveldoesnotchange.12/31/2022140PeriodicReviewPolicy:SafetyInventoryL:LeadtimeT:ReorderintervalR: AveragedemandperunittimeR:StandarddeviationofdemandperunittimeL+T:StandarddeviationofdemandduringL+TperiodsCSL:Cycleservicelevelss: SafetyinventoryOUL:Orderuptolevel12/31/2022141Example:PeriodicReviewPolicyR=2,500/week;R=500L=2weeks;T=4weeks;CSL=0.90Whatistherequiredsafetyinventory?FactorsdrivingsafetyinventoryDemanduncertaintyReplenishmentleadtimeReorderinterval12/31/2022142ImpactofSupplyUncertaintyR:AveragedemandperperiodR:StandarddeviationofdemandperperiodL:AverageleadtimesL:Standarddeviationofleadtime12/31/2022143ImpactofSupplyUncertaintyR=2,500/day;R=500L=7days;Q=10,000;CSL=0.90SafetyinventorywhensL=0is1,695SafetyinventorywhensL=1is3,625SafetyinventorywhensL=2is6,628SafetyinventorywhensL=3is9,760SafetyinventorywhensL=4is12,927SafetyinventorywhensL=5is16,109SafetyinventorywhensL=6is19,29812/31/2022144BasicQuickResponseInitiativesReduceinformationuncertaintyindemandReducereplenishmentleadtimeReducesupplyuncertaintyorreplenishmentleadtimeuncertaintyIncreasereorderfrequencyorgotocontinuousreview12/31/2022145AccurateResponse:TheImpactofInventoryPooling12/31/2022146FactorsAffectingValueofAggregationDemandCorrelationCoefficientofVariationofdemandValueofproduct12/31/2022147ImpactofCorrelationonBenefitFromAggregation12/31/2022148ImpactofcvandProductValueonBenefitFromAggregation12/31/2022149MethodsofAccurateResponsePhysicalCentralizationInformationcentralizationSpecializationProductsubstitutionRawmaterialcommonality(postponement)12/31/2022150Example8.9:ValueofComponentCommonality12/31/2022151MassCustomizationI:CustomizeServicesAroundStandardizedProductsDEVELOPMENTPRODUCTIONMARKETINGDELIVERYDelivercustomizedservicesaswellasstandardizedproductsandservicesMarketcustomizedserviceswithstandardizedproductsorservicesContinueproducingstandardizedproductsorservicesContinuedevelopingstandardizedproductsorservicesSource:B.JosephPine12/31/2022152MassCustomizationII:CreateCustomizableProductsandServicesDEVELOPMENTPRODUCTIONMARKETINGDELIVERYDeliverstandard(butcustomizable)productsorservicesMarketcustomizableproductsorservicesProducestandard(butcustomizable)productsorservicesDevelopcustomizableproductsorservices12/31/2022153MassCustomizationIII:ProvideQuickResponseThroughoutValueChainDEVELOPMENTPRODUCTIONMARKETINGDELIVERYReduceDeliveryCycleTimesReduceselectionandorderprocessingcycletimesReduceProductioncycletimeReducedevelopmentcycletime12/31/2022154MassCustomizationIV:ProvidePointofDeliveryCustomizationDEVELOPMENTPRODUCTIONMARKETINGDELIVERYDeliverstandardizeportionMarketcustomizedproductsorservicesProducestandardizedportioncentrallyDevelopproductswherepointofdeliverycustomizationisfeasiblePointofdeliverycustomization12/31/2022155MassCustomizationV:ModularizeCo