Session16handout - Supply Chain Modeling...

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Supply Chain Modeling Session 16: Postponement Atalay Atasu
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Objective of Today’s Class Remind you of the Safety Stock model that  you have seen in the core operations class Introduce the idea of ‘postponement’ Pros and cons of ‘postponement’ Apply the safety stock model to the  European DC in the HP DeskJet Printer  supply chain  Quantify the impact of supply chain  structure changes on the performance of the  supply chain
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Safety Stock Model: Motivating Example Also known as Order-up-to or Base Stock or Periodic Review model Barilla Supply Chain Barilla Barilla CDC Distributors Retailers 800 SKUs 1 month inventory 150 SKUs 2 weeks inventory 10-12 days inventory
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Determination of the Safety Stock Inventory Level time On-hand inventory Inventory position L R+L 2R+L 3R+L R 2R 3R 4R 0 μR+ss μL+ss μ(R+L)+ss ss ?
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Average Stock Levels Average Order Quantity =  μ R Average Pipeline Stock =  μ L Average Cycle Stock =  μ R/2
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Notation Inventory Position = Quantity + Quantity on hand on order S - Base stock level/Order-up-to level R - Review period (or TBO-time between orders) L - Replenishment lead time μ - Mean demand per unit time σ - Standard deviation of per unit time demand Q - Order quantity ss - Safety stock Ordering Rule: Place an order every R periods so as to bring your inventory position to the Base Stock Level, S
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Periodic Review: Exposure Period If I order today, how long a period of uncertainty must I cover?
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