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fa04_lex7fwd - 1.221J/11.527J/ESD.201J Transportation...

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SPEAKER: Joseph M. Sussman MIT 1.221J/11.527J/ESD.201J Transportation Systems Fall 2004 LECTURE 7 ( and forward ): FREIGHT DISPLAYS
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2 5 432 1 BA Another 40 containers/day Assembly Production Plant Process
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3 INVENTORY AT B 40 Containers/day are “consumed” at B Inventory at B 40 Time (Days) 01 2 3
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4 PIPELINE INVENTORY Inventory 200 1 2 3 4 Time
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5 WHAT CAN GO WRONG? Delays along the way -- service reliability goods don’t arrive ISSUE: Stock-outs 80 40 1 2 3 Time Inventory at B
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6 WHAT CAN GO WRONG? (CONTINUED) So, perhaps the customer at B keeps a day’s worth of inventory Problems: Bigger Inventory Warehousing Costs Insurance Costs 80 1 2 3 4 Time (days ) Inventory
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7 A BIG ISSUE -- STOCK-OUTS ± WHAT DOES A STOCK-OUT COST? ± Examples ± GM Assembly Plant ± Retail Store ± Blood Bank
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8 Another approach: Order less often -- only every 5th day Average Inventory at B = 100, rather than 20 200 5 Time Inventory at B
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9 PIPELINE INVENTORY Inventory 200 1 2 3 4 Time
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10 LEVEL-OF-SERVICE VARIABLES ± Travel Time -- Because of Pipeline ± Reliability -- Because of stock-outs
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11 AIR FORCE SUSTAINMENT SYSTEM Planes Spare Parts Supply ±±±± Line ² Planes fly missions ² Parts fail ² If spares not available, plane cannot fly Let’s discuss from an inventory viewpoint? ² Why not keep a lot of spare parts around? ² What is the inventory we really care about? ² How do you value a stock-out?
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12 SOME OTHER ISSUES ± Probabilistic use rate of spare parts ± Size of orders ± Dual use of parts for different airplanes ± Wartime - Peacetime
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13 INVENTORY MINIMIZATION ± If one needs a greater amount of inventory because of unreliability in the transportation system or probabilistic use rate, you generate costs as a result of needing larger inventory to avoid stock-outs. ± We try to balance the costs of additional inventory with the costs of stock-outs.
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