Cost of shrinkage defects etc order size required

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Cost of Shrinkage, Defects, Etc… Order Size Required = Actual Demand / proportion of acceptable product per order Sample: 1000 laptops (1.5% arrive defective, 1.2% damaged. 2.0% theft, 1.5% defective at manufacturing, 2.5% raw materials purchased) 1000/100-.015% = 1016 ---------- 1016/100-.012 = 1029 ------ and so on and so on. = 1094 light bulbs Risk Pooling - Square Root Rule Allows you to see how much inventory will be required to maintain similar stockout rates when changing the number of warehouses.
Bullwhip Effect Very high and very low supply levels Despite fairly constant demand levels What can contribute to/result from bullwhip effect? 1. Poor forecasting, Poor analysis, Poor communication 2.Order Batching – Trying to place large orders 3. Price Fluctuations – Promotions, Quantity discounts, Special pricing/payment options...Can cause batching 4.Rationing – Demand higher than supply. Promotes rationing on part of “distributor”. “Retailers” may get less than ordered. 5. Shortage Gaming – Retailers inflate order sizes to counteract rationing Controlling the Bullwhip Effect 1. EDLP - everyday low pricing 2. Vendor Managment Inventory Systems 3. Information sharing between supply chain partners 4. Practicing lean manufacturing Module 7 How do you increase profit via global strategy? Increase Revenues Globally •Growth Opportunities - New Markets •Managing Risk •Understanding markets and Trends Decrease Costs Globally •Cheap Labor and Resources •Taxes, Tariffs, and other Benefits •Understanding markets and Trends Globalization makes this easier? Makes this harder? –Competition – Revenues and Costs –LegalIssues – Opportunities and Restrictions –Exchange Rates - Fluctuating –Information Managemen t Electronic Manufacturing Services (EMS) Industry • Companies that can take on numerous primary supply chain responsibilities associated with the manufacturing of electronic components assembled end-items • Exploit economies of scale in the manufacturing of electronic devices • Similar parts, processes, designs, techniques, channels of distribution Strong Vs. Weak Currencies Example: Euro vs. Dollar Strong Dollar Scenario (Weak Euro)
–Example: 2 Euros = 1 Dollar –Consumer Effect: 40,000 Euro Car would cost $20,000 (US) –European Cars easier to Sell in USA – Good for foreign manufacturers selling in US, Bad for US manufacturers – Good for US consumers... More flexible buying power Weak Dollar Scenario (Strong Euro) – Example: 1 Euro = 2 Dollars – Consumer Effect: 40,000 Euro Car would cost $80,000 (US) – European Cars harder to Sell in USA – Bad for foreign manufacturers selling in US, Good for US manufacturers Corporate Options Procedure for US Export 1. Who controls the product/service being exported? Department of State –ENFORCED RULES: International Traffic in Arms Regulations (ITAR) –CLASSIFICATION DOCUMENT: US Munitions List (USML) –CLASSIFICATION NUMBER: Categorize product/service using appropriate USML #.

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