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Unformatted text preview: , it was also shown that a variation of the
order-up-to policy based on the echelon inventory level would achieve near-optimum in
more realistic conditions. Such a policy is in the same spirit of Synchronous
Manufacturing System. [The] production rule will adjust the production rate at a stage
according to the inventory levels at the downstream stages. Specifically, the production
rate at a stage will decrease (increase) when the inventory levels at those downstream
stages are higher (lower) than their target levels, (see ). To implement echelon-based
inventory control, the upstream company should keep track of the inventory level at the
downstream of the supply chain and start production only when the echelon inventory
position is low enough. This way, the upstream company can better determine when and
what to produce, and downstream companies can improve the service level with less
In practice, sharing of inventory information is implemented in different forms.
CRP (Continuous Replenishment Programs) or Vendor-Managed Inventory (VMI) is a
practice often employed by two neighboring partners in a supply chain (e.g., Procter &
Gamble and Wal-Mart). In a typical CRP relationship, the buyer shares its inventory data
with the vendor and asks the vendor to manage his inventory within a guideline.
Example 1. (Apple-Fritz Supplier Hub, see ) In the past, supplier lead times
to Apple Computer Sacramento, California, and Fountain, Colorado plants were both
long and unreliable, due to the Fact that most of the suppliers are located in Asia with
supplier shipments subjected to possible delays in transportation and customs clearing.
The supply chain between an Asian supplier and Apple involves at least five steps
ocean freight processing, customs clearance, long-haul transportation, warehousing, and
local transportation. In the mid-1990 , Apple established a supplier hub at each plant
and outsourced the management of inbound logistics to Fritz Companies, a third-party
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This note was uploaded on 11/06/2013 for the course ISYE 6202 taught by Professor Staff during the Fall '08 term at Georgia Tech.
- Fall '08
- Industrial Engineering