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!!BA#244:#Supply#Chain#Management#
Next#Class#
! CASE STUDIES: 1. McDonald's India 2. Union Carbide Bhopal
! 20 minutes + 10 minutes ONLY
! Ask questions!
! You will grade the group ! 40% - Content and SCM Analysis ! 30% - Visual Ease and Presentation Flow ! 30% - Interaction with Audience
Midterms#Stats#
! Max: !45!(90%)!
! Min: !39!(78%)!
! Mean: !41!(82%)!
Culture#in#Negotiation#
! Gelfand, M., et. al. 2013. Toward a Culture-by-Context Perspective on Negotiation: Negotiating Teams in the United States and Taiwan. Journal of Applied Psychology. 98 (3): 504-513.!
Culture#in#Negotiation#
! Results!! Taiwanese!teams!nego?ated!lessAop?mal!outcomes!
than!Taiwanese!solos!
Culture#in#Negotiation#
! Prac?cal!Implica?ons!! Team!or!Solo!! Consider!own!and!counterparts!cultures!! Culture!influences!nego?a?on!outcomes,!but!
depending!on!context!
Internal#Supply#Chain#
Procurement! Produc?on! Storage! Distribu?on! Sales!and!Marke?ng!
Inventory#System#
! Specifies!! How!much!stocks!should!be!maintained!! Replenishment!Schedule!! Replenishment!Order!Size!
Inventory#Cost#
! Includes:!! Carrying!! Order!Processing!! StockAout!! SetAup!
Inventory#
! Is!a!stock!of!item!or!asset!in!the!organiza?on!
Inventory#Systems#
! QAmodel!! Fixed!order!quan?ty!model!or!EOQ!model!
! PAmodel!! Fixed!period!model,!periodic!review!system,!fixed!
order!interval!system!
Q?Model#
Idle!State,!wai?ng!for!demand!
Demand!occurs,!items!taken!from!inventory!or!backAordered!
Compute!inventory!Posi?on! Posi?on!=!OnAhand!+!OnAorder!
!BackAorder!
Posi?on!
Q?Model#
! Defines!an!inventory!posi?on!R!(reAorder!point),!when!an!order!Q!is!placed!
! Q!is!called!the!Economic!Order!Quan?ty!or!EOQ!
! Q!is!always!the!same!quan?ty!in!each!order!
Q?Model#/#Fixed#Order#Quantity#
Reorder!level!
Safety!stock!level!
Maximum!stock!
Lead!?me!for!delivery!
Reorder!point!
Fixed!order!quan?ty!
Time%
Stock%level%
Assumptions#of#Q?Model#
! Demand!is!constant!and!uniform!at!all!?mes!
! Replenishment!lead!?me!is!constant!
! Product!Unit!Cost!is!constant!
! Inventory!Holding!Cost!based!on!average!inventory!
! Ordering!and!SetAup!Cost!are!constant!
! No!back!orders!allowed!
! No!returns!or!rejec?ons!in!delivery!
Formulas#
! Q!=!EOQ!=!sqrt!(2DS!/!H)!! D!=!Annual!Demand!! S!=!SetAup!cost!or!order!processing!cost!! H!=!Annual!holding!and!storage!cost!per!unit!or!
average!inventory!
! R!=!d!x!L!! d!=!Average!daily!demand!! L!=!Replenishment!lead!?me!
P?Model#
Idle!State,!wai?ng!for!demand! Demand!occurs,!items!taken!from!inventory!or!backAordered!
Compute!inventory!Posi?on! Posi?on!=!OnAhand!+!OnAorder!
!BackAorder!
Has!review!period,!T!arrived?!
Yes!
No!
Compute!order!quan?ty,!q,!to!bring!inventory!to!needed!level! Issue!order!for!computed!quan?ty!
Formulas#
! q!=!d!(T!+!L)!!I!! q!=!quan?ty!to!be!ordered!! T!=!Period!between!reviews!! L!=!Replenishment!lead!?me!! d!=!Forecasted!average!demand!! I!=!Inventory!onAhand!including!those!on!order!
P?Model#
! Inventory!is!checked!only!aher!a!fixed!period!
! ReAorders!are!placed!aher!a!period!T!to!bring!stocks!to!desired!level!
! The!quan?ty!ordered!each!period!T!may!vary!depending!on!stock!posi?on!
P?Model#/#Periodic#Review#System#
Safety!stock!level!
Review!Period!
Reorder!point!Reorder!quan?ty!
Time%
Stock%level%
Suppliers!lead!?me!
P?Model#
! Length!of!review!period!! The!shorter,!the!more!effort!and!cost!is!involved!
Differences#
Parameter' Q)Model' P)Model'
Order!Volume! Constant! Variable!
When!to!Order! When!we!reach!reAorder!point!
Aher!a!fixed!?me,!T!
Stock!Level!Upda?ng! Each!?me!product!is!drawn!from!or!replenished!in!the!inventory!
Only!during!stock!review!at!end!of!T!
Inventory!Size! Less!than!PAModel! Larger!than!QAModel!
Effort!required! More!than!PAModel!due!to!constant!monitoring!
Less!than!QAModel!
Category!Type! High!value!and!Cri?cal!Products!
Low!value,!rou?ne,!and!nonAcri?cal!products!
Other#Inventory#Systems#
! There!is!difficulty!in!obtaining!actual!order!setAup,!carrying,!and!stockAout!costs!
! Assump?ons!governing!use!of!these!models!may!not!hold!true!! Demand!is!ohen!not!constant!or!uniform!! Replenishment!lead!?me!is!usually!not!constant!
! As!a!result!! Modified!PAModel!!Op?onal!Replenishment!System;!1!
Bin!System!! Modified!Q!Model!!2!Bin!System!
Modified#P?Model:#Optional#Replenishment#System##
! Check!inventory!aher!every!fixed!period,!T!
! Order!is!placed!only!if!the!level!is!below!a!set!amount!
! Systems!defines!a!minimum!order!size!Q,!a!maximum!inventory!of!M,!and!an!inventory!posi?on!I!
! q!=!M!!I!! if!q>=Q,!order!q,!otherwise!dont!order!any!
Modified#P?Model:#One#Bin#System#
! Periodic!replenishment!of!the!bin,!at!T!
! Aher!T,!the!bin!is!checked!for!stock!level!
! The!level!is!brought!to!a!set!maximum!level!at!each!examina?on!
Modified#P?Model:#One#Bin#System#
Modified#Q?Model:#Two#Bin#System#
! Items!are!drawn!from!one!bin!
! When!first!bin!is!depleted,!it!signals!reordering!of!replenishment!
! A!second!bin!serves!requirements!while!replenishment!is!underway!
! Second!bin!serves!as!replenishment!lead!?me!stock!
Modified#Q?Model:#Two#Bin#System#
!!
What#inventory#system#does#your#company#use?#
Economic#Production#Quantity#
! EOQ!/!QAmodel!
! EPQ!model!is!beper!suited!to!being!used!by!a!company!manufacturing!end!items!!
! Uses!setAup!cost!for!the!year!(rather!than!the!annual!order!cost!in!the!EOQ!model)!!
Economic#Production#Quantity#
! Used!to!determine!the!op?mal!order!quan?ty!that!an!organiza?on!should!place!with!a!supplier!to!minimize!inventory!costs,!while!balancing!inventory!holding!and!average!fixed!order!costs!(Dolgui!et!al.,!2010)!
! ohen!associated!with!items!produced!inhouse!!
!
Tips#
! There!are!several!variants!on!the!EPQ;!Evaluate!which!version!to!use!in!the!organiza?on!and!check!periodically!to!see!if!there!have!been!noteworthy!advancements!on!the!model!!
! Consider!inves?ng!in!some!quality!sohware!to!handle!inventory!management!with!builtAin!EPQ!func?ons,!or!alterna?vely!use!one!of!the!many!free!EPQ!calculators!available!online!
Disadvantages#
! Assumes!that!all!units!produced!are!of!perfect!quality!and!shortage!is!not!allowed.!In!prac?ce,!however,!this!could!underes?mate!the!actual!number!required!because!nonAconforming!product!or!scrap!items!are!possible!!
! In!tradi?onal!EPQ!models,!setAup!(or!ordering)!cost!is!treated!as!a!constant.!In!reality!setAup!cost!can!be!controlled,!for!example,!through!worker!training,!procedural!changes,!as!well!as!specialized!equipment!acquisi?on!!
Case#Studies#
! HewlepAPackard!(HP)!! Cut!printer!supply!costs!by!25%!using!inventory!
models!! Realized!net!savings!of!USD!80M!through!moving!
transAocean!freight!lanes!from!air!to!sea!!
Vendor#Managed#Inventory#
! Is!a!supply!chain!agreement!where!an!upstream!agent!(e.g.!supplier!or!manufacturer)!takes!control!of!the!inventory!management!decisions!for!one!or!more!downstream!agents!(e.g.!retailers)!(Fry,!2011)!
! Also!known!as!supplier!managed!inventory,!con?nuous!replenishment!program,!or!supplierAassisted!inventory!replenishment!
Benefits#
1. Mi?gates!the!bullwhip!effect!by!reducing!the!number!of!agents!making!inventoryArelated!decisions!in!the!supply!chain!
2. Because!vendors!do!not!need!to!wait!for!retailer!delivery!requests,!they!can!more!appropriately!handle!upcoming!orders!and!schedule!mul?ple!deliveries!on!a!single!route!! more!regular!deliveries,!thus!reducing!lead!?mes!
and!safety!stock!levels!!
Successful#Application#
! requires!the!customer!to!send!informa?on!on!items!sold!to!the!distributor!
! usually!captured!by!barcoding!and!scanning!technologies!and!is!passed!to!the!distributor!via!EDI!or!the!Internet!on!a!daily!basis!!
! distributor!then!processes!it!and!provides!acknowledgement!to!the!customer!with!details!of!the!quan??es!and!product!descrip?ons,!delivery!dates!and!des?na?ons!and!the!release!of!goods!
Case#Studies#
! Campbell's!Soups!! In!their!con?nuous!replenishment!program,!VMI!
resulted!in!a!50%!reduc?on!in!inventories!in!retailer!distribu?on!centers!and!a!0.8%!increase!in!service!levels!!
Case#Studies#
! WalAMart!! Has!established!a!Retail!Link!program!that!provides!
its!suppliers,!Johnson!&!Johnson!and!Lever!Brothers,!with!an!online!summary!and!direct!satellite!transmission!of!pointAofAsale!data!
!!End#