Bull whip effect 3

In 6 it was also shown that a variation of the order

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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 [6]). 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 inventory. 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 [7]) In the past, supplier lead times s to Apple Computer’ Sacramento, California, and Fountain, Colorado plants were both s 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 s and outsourced the management of inbound logistics to Fritz Companies, a third-party logistics servic...
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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.

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