306 SCM Unit III

LSM-306 Supply Chain Management
Master of Business Administration

(Logistics & Supply Chain Management)
Supply Chain Management
SCM- 306
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GITAM INSTITUTE OF INTERNATIONAL BUSINESS
Professor P.R.S SARMA
M.B.A & Ph.D. - IITD
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Why Network Planning?
Find the right balance between inventory, transportation and
manufacturing costs,
Match supply and demand under uncertainty by positioning and managing
inventory effectively,
Utilize resources effectively by sourcing products from the most
appropriate manufacturing facility
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Three Hierarchical Steps
Network design
Number, locations and size of manufacturing plants and warehouses
Assignment of retail outlets to warehouses
Major sourcing decisions
Typical planning horizon is a few years.
Inventory positioning:
Identifying stocking points
Selecting facilities that will produce to stock and thus keep inventory
Facilities that will produce to order and hence keep no inventory
Related to the inventory management strategies
Resource allocation:
Determine whether production and packaging of different products is done at the right facility
What should be the plants sourcing strategies?
How much capacity each plant should have to meet seasonal demand?
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Network Design
Physical configuration and infrastructure of the supply chain.
A strategic decision with long-lasting effects on the firm.
Decisions relating to plant and warehouse location as well as distribution
and sourcing
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Reevaluation of Infrastructure
Changes in:
demand patterns
product mix
production processes
sourcing strategies
cost of running facilities.
Mergers and acquisitions may mandate the integration of different logistics
networks
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Key Strategic Decisions
Determining the appropriate number of facilities such as plants and
warehouses.
Determining the location of each facility.
Determining the size of each facility.
Allocating space for products in each facility.
Determining sourcing requirements.
Determining distribution strategies, i.e., the allocation of customers to
warehouse
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Objective and Trade-Offs
Objective: Design or reconfigure the logistics network in order to minimize annual system-
wide cost subject to a variety of service level requirements
Increasing the number of warehouses typically yields:
An improvement in service level due to the reduction in average travel time to the customers
An increase in inventory costs due to increased safety stocks required to protect each warehouse
against uncertainties in customer demands.
An increase in overhead and setup costs
A reduction in outbound transportation costs: transportation costs from the warehouses to the
customers
An increase in inbound transportation costs: transportation costs from the suppliers and/or
manufacturers to the warehouses.
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Data Collection
Locations of customers, retailers, existing warehouses and distribution centers,
manufacturing facilities, and suppliers.
All products, including volumes, and special transport modes (e.g., refrigerated).
Annual demand for each product by customer location.
Transportation rates by mode.
Warehousing costs, including labor, inventory carrying charges, and fixed operating costs.
Shipment sizes and frequencies for customer delivery.
Order processing costs.
Customer service requirements and goals.
Production and sourcing costs and capacities
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Data Aggregation
Customer Zone
Aggregate using a grid network or other clustering technique for those in close proximity.
Replace all customers within a single cluster by a single customer located at the center of the cluster
Five-digit or three-digit zip code based clustering.
Product Groups
Distribution pattern
Products picked up at the same source and destined to the same customers
Logistics characteristics like weight and volume.
Product type
product models or style differing only in the type of packaging.
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Replacing Original Detailed Data with Aggregated Data
Technology exists to solve the logistics network design problem with the
original data
Data aggregation still useful because forecast demand is significantly more
accurate at the aggregated level
Aggregating customers into about 150-200 zones usually results in no
more than a 1 percent error in the estimation of total transportation costs
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General Rules for Aggregation
Aggregate demand points into at least 200 zones
Holds for cases where customers are classified into classes according to their service
levels or frequency of delivery
Make sure each zone has approximately an equal amount of total demand
Zones may be of different geographic sizes.
Place aggregated points at the center of the zone
Aggregate products into 20 to 50 product groups
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Customer Aggregation
Based on 3-Digit Zip Codes
Total Cost:$5,796,000
Total Customers: 18,000
Total Cost:$5,793,000
Total Customers: 800
Cost Difference < 0.05%
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Product Aggregation
Total Cost:$104,564,000
Total Products: 46
Total Cost:$104,599,000
Total Products: 4
Cost Difference: 0.03%
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Transportation Rates
Rates are almost linear with distance but not with volume
Differences between internal rate and external rate
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Internal Transportation Rate
For company-owned trucks
Data Required:
Annual costs per truck
Annual mileage per truck
Annual amount delivered
Trucks effective capacity
Calculate cost per mile per SKU.
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External Transportation Rate
Two Modes of Transportation
Truckload, TL
Country sub-divided into zones. One zone/state except for:
Big states, such as Florida or New York (two zones)
Zone-to-zone costs provides cost per mile per truckload between any two zones.
TL cost from Chicago to Boston =
Illinois-Massachusetts cost per mile X Chicago-Boston distance
TL cost structure is not symmetric
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Less-Than-Truckload, LTL
Class rates
standard rates for almost all products or commodities shipped.
Classification tariff system that gives each shipment a rating or a class.
Factors involved in determining a products specific class include:
product density, ease or difficulty of handling and transporting, and
liability for damage.
After establishing rating, identify rate basis number.
Approximate distance between the loads origin and destination.
With the two, determine the specific rate per hundred pounds (hundred weight,
or cwt) from a carrier tariff table (i.e., a freight rate table).
Exception rates provides less expensive rates
Commodity rates are specialized commodity-specific rates
External Transportation Rate
Two Modes of Transportation
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SMC3s CzarLite
Engine to find rates in fragmented LTL industry
Nationwide LTL zip code-based rate system.
Offers a market-based price list derived from studies of LTL pricing on a regional,
interregional, and national basis.
A fair pricing system
Often used as a base for negotiating LTL contracts between shippers, carriers, and
third-party logistics providers
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Transportation Rate for Shipping 4,000 lbs.
Transportation rates for shipping 4,000 lb
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Mileage Estimation
Estimate lon
a
and lat
a
, the longitude and latitude of point a (and similarly
for point b)
Distance between a and b
For short distances
For large distances
2 2
) 6 9 ( ( ) a b a b a b l o n D l o n l a t l a t - = - -
1 2 2
) ) )) )) 2(69) sin (sin( cos( cos( (sin(
2 2
a b a b
ab a X b X
lat lat lon lon
D lat lat
-
- -
= -
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Circuity Factor,
Equations underestimate the actual road distance.
Multiply D
ab
by .
Typical values:
= 1.3 in metropolitan areas
= 1.14 for the continental United States
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Chicago-Boston Distance
lon
Chicago
= -87.65
lat
Chicago
= 41.85
lon
Boston
= -71.06
lon
Boston
= 42.36
D
Chicago, Boston
= 855 miles
Multiply by circuity factor = 1.14
Estimated road distance = 974 miles
Actual road distance = 965 miles
GIS systems provide more accuracy
Slows down systems
Above approximation good enough!
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Warehouse Costs
Handling costs
Labor and utility costs
Proportional to annual flow through the warehouse.
Fixed costs
All cost components not proportional to the amount of flow
Typically proportional to warehouse size (capacity) but in a nonlinear way.
Storage costs
Inventory holding costs
Proportional to average positive inventory levels.
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Determining Fixed Costs
Warehouse fixed costs as a function of the warehouse capacity
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Determining Storage Costs
Multiply inventory turnover by holding cost
Inventory Turnover =
Annual Sales / Average Inventory Level
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Warehouse Capacity
Estimation of actual space required
Average inventory level =
Annual flow through warehouse/Inventory turnover ratio
Space requirement for item = 2*Average Inventory Level
Multiply by factor to account for
access and handling
aisles,
picking, sorting and processing facilities
AGVs
Typical factor value = 3
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Warehouse Capacity Example
Annual flow = 1,000 units
Inventory turnover ratio = 10.0
Average inventory level = 100 units
Assume each unit takes 10 sqft. of space
Required space for products = 2,000 sqft.
Total space required for the warehouse is about 6,000 square feet
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Potential Locations
Geographical and infrastructure conditions.
Natural resources and labor availability.
Local industry and tax regulations.
Public interest.
Not many will qualify based on all the above conditions
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Service Level Requirements
Specify a maximum distance between each customer and the warehouse
serving it
Proportion of customers whose distance to their assigned warehouse is no
more than a given distance
95% of customers be situated within 200 miles of the warehouses serving them
Appropriate for rural or isolated areas
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Future Demand
Strategic decisions have to be valid for 3-5 years
Consider scenario approach and net present values to factor in expected
future demand over planning horizon
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$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
0 2 4 6 8 10
Number of Warehouses
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Total Cost
Transportation Cost
Fixed Cost
Inventory Cost
Number of Warehouses
Optimal
Number
of Warehouses
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Industry Benchmarks:
Number of Distribution Centers
Avg.
# of
WH
3 14 25
Pharmaceuticals
Food Companies Chemicals
- High margin product
- Service not important (or
easy to ship express)
- Inventory expensive
relative to transportation
- Low margin product
- Service very important
- Outbound transportation
expensive relative to inbound
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Model Validation
Reconstruct the existing network configuration using the model and collected data
Compare the output of the model to existing data
Compare to the companys accounting information
Often the best way to identify errors in the data, problematic assumptions,
modeling flaws.
Make local or small changes in the network configuration to see how the system
estimates impact on costs and service levels.
Positing a variety of what-if questions.
Answer the following questions:
Does the model make sense?
Are the data consistent?
Can the model results be fully explained?
Did you perform sensitivity analysis?
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Solution Techniques
Mathematical optimization techniques:
1. Exact algorithms: find optimal solutions
2. Heuristics: find good solutions, not necessarily optimal
Simulation models: provide a mechanism to evaluate specified design alternatives
created by the designer.
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Example
Single product
Two plants p1 and p2
Plant p2 has an annual capacity of 60,000 units.
The two plants have the same production costs.
There are two warehouses w1 and w2 with identical warehouse handling costs.
There are three markets areas c1,c2 and c3 with demands of 50,000, 100,000 and
50,000, respectively.
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Unit Distribution Costs
2 1 2 2 5 w2
5 4 3 4 0 w1
c3 c2 c1 p2 p1 Facility warehouse
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Heuristic #1:
Choose the Cheapest Warehouse to Source Demand
D = 50,000
D = 100,000
D = 50,000
Cap = 60,000
$5 x 140,000
$2 x 60,000
$2 x 50,000
$1 x 100,000
$2 x 50,000
Total Costs = $1,120,000
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Heuristic #2:
Choose the warehouse where the total delivery costs to and from the warehouse are the
lowest
[Consider inbound and outbound distribution costs]
D = 50,000
D = 100,000
D = 50,000
Cap = 60,000
$4
$5
$2
$3
$4
$5
$2
$1
$2
$0
P1 to WH1 $3
P1 to WH2 $7
P2 to WH1 $7
P2 to WH 2 $4
P1 to WH1 $4
P1 to WH2 $6
P2 to WH1 $8
P2 to WH 2 $3
P1 to WH1 $5
P1 to WH2 $7
P2 to WH1 $9
P2 to WH 2 $4
Market #1 is served by WH1, Markets 2 and 3
are served by WH2
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D = 50,000
D = 100,000
D = 50,000
Cap = 60,000
Cap = 200,000
$5 x 90,000
$2 x 60,000
$3 x 50,000
$1 x 100,000
$2 x 50,000
$0 x 50,000
P1 to WH1 $3
P1 to WH2 $7
P2 to WH1 $7
P2 to WH 2 $4
P1 to WH1 $4
P1 to WH2 $6
P2 to WH1 $8
P2 to WH 2 $3
P1 to WH1 $5
P1 to WH2 $7
P2 to WH1 $9
P2 to WH 2 $4
Total Cost = $920,000
Heuristic #2:
Choose the warehouse where the total delivery costs to and from the warehouse are the
lowest
[Consider inbound and outbound distribution costs]
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The Optimization Model
The problem described earlier can be framed as the following linear programming
problem.
Let
x(p1,w1), x(p1,w2), x(p2,w1) and x(p2,w2) be the flows from the plants to the
warehouses.
x(w1,c1), x(w1,c2), x(w1,c3) be the flows from the warehouse w1 to customer
zones c1, c2 and c3.
x(w2,c1), x(w2,c2), x(w2,c3) be the flows from warehouse w2 to customer zones
c1, c2 and c3
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The problem we want to solve is:
min 0x(p1,w1) + 5x(p1,w2) + 4x(p2,w1)
+ 2x(p2,w2) + 3x(w1,c1) + 4x(w1,c2)
+ 5x(w1,c3) + 2x(w2,c1) + 2x(w2,c3)
subject to the following constraints:
x(p2,w1) + x(p2,w2) s 60000
x(p1,w1) + x(p2,w1) = x(w1,c1) + x(w1,c2) + x(w1,c3)
x(p1,w2) + x(p2,w2) = x(w2,c1) + x(w2,c2) + x(w2,c3)
x(w1,c1) + x(w2,c1) = 50000
x(w1,c2) + x(w2,c2) = 100000
x(w1,c3) + x(w2,c3) = 50000
all flows greater than or equal to zero.
The Optimization Model
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Optimal Solution
0 60,000 0 60,000 0 w2
50,000 40,000 50,000 0 140,000 w1
c3 c2 c1 p2 p1 Facility
warehouse
Total cost for the optimal strategy is $740,000
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Simulation Models
Useful for a given design and a micro-level analysis. Examine:
Individual ordering pattern.
Specific inventory policies.
Inventory movements inside the warehouse.
Not an optimization model
Can only consider very few alternate models
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Which One to Use?
Use mathematical optimization for static analysis
Use a 2-step approach when dynamics in system has to be analyzed:
Use an optimization model to generate a number of least-cost solutions at the
macro level, taking into account the most important cost components.
Use a simulation model to evaluate the solutions generated in the first phase.
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DSS for Network Design
Flexibility to incorporate a large set of preexisting network characteristics
Other Factors:
Customer-specific service level requirements.
Existing warehouses kept open
Expansion of existing warehouses.
Specific flow patterns maintained
Warehouse-to-warehouse flow possible
Production and Bill of materials details may be important
Robustness
Relative quality of the solution independent of specific environment, data
variability or specific settings
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Inventory Positioning and Logistics Coordination
Multi-facility supply chain that belongs to a single firm
Manage inventory so as to reduce system wide cost
Consider the interaction of the various facilities and the impact of this interaction
on the inventory policy of each facility
Ways to manage:
Wait for specific orders to arrive before starting to manufacture them [make-
to-order facility]
Otherwise, decide on where to keep safety stock?
Which facilities should produce to stock and which should produce to order?
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Single Product, Single Facility Periodic Review Inventory
Model
Assume -
SI: amount of time between when an order is placed until the facility receives a
shipment (Incoming Service Time)
S: Committed Service Time made by the facility to its own customers.
T: Processing Time at the facility.
Net Lead Time = SI + T - S

Safety stock at the facility:
S T SI > -
S T SI zh - -
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2-Stage System
Reducing committed service time from facility 2 to facility 1 impacts required
inventory at both facilities
Inventory at facility 1 is reduced
Inventory at facility 2 is increased
Overall objective is to choose:
the committed service time at each facility
the location and amount of inventory
minimize total or system wide safety stock cost.
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ElecComp Case
Large contract manufacturer of circuit boards and other high tech parts.
About 27,000 high value products with short life cycles
Fierce competition => Low customer promise times < Manufacturing Lead Times
High inventory of SKUs based on long-term forecasts => Classic PUSH STRATEGY
High shortages
Huge risk
PULL STRATEGY not feasible because of long lead times
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New Supply Chain Strategy
OBJECTIVES:
Reduce inventory and financial risks
Provide customers with competitive response times.
ACHIEVE THE FOLLOWING:
Determining the optimal location of inventory across the various stages
Calculating the optimal quantity of safety stock for each component at each
stage
Hybrid strategy of Push and Pull
Push Stages produce to stock where the company keeps safety stock
Pull stages keep no stock at all.
Challenge:
Identify the location where the strategy switched from Push-based to Pull-
based
Identify the Push-Pull boundary
Benefits:
For same lead times, safety stock reduced by 40 to 60%
Company could cut lead times to customers by 50% and still reduce safety
stocks by 30%
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Notations Used
How to read the diagrams
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Trade-Offs
If Montgomery facility reduces committed lead time to 13 days
assembly facility does not need any inventory of finished goods
Any customer order will trigger an order for parts 2 and 3.
Part 2 will be available immediately, since it is held in inventory
Part 3 will be available in 15 days
13 days committed response time by the manufacturing facility
2 days transportation lead time.
Another 15 days to process the order at the assembly facility
Order is delivered within the committed service time.
Assembly facility produces to order, i.e., a Pull based strategy
Montgomery facility keeps inventory and hence is managed with a Push or Make-
to-Stock strategy.
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Current Safety Stock Location
Current safety stock location
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Optimized Safety Stock Location
Optimized safety stock
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Current Safety Stock with Lesser Lead Time
Optimized safety stock with reduced lead time
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Supply Chain with
More Complex Product Structure
Current supply chain
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Optimized Supply Chain with
More Complex Product Structure
Optimized supply chain
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Key Points
Identifying the Push-Pull boundary
Taking advantage of the risk pooling concept
Demand for components used by a number of finished products has smaller variability
and uncertainty than that of the finished goods.
Replacing traditional supply chain strategies that are typically referred to as
sequential, or local, optimization by a globally optimized supply chain strategy.
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Local vs. Global Optimization
Trade-off between quoted lead time and safety stock
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Global Optimization
For the same lead time, cost is reduced significantly
For the same cost, lead time is reduced significantly
Trade-off curve has jumps in various places
Represents situations in which the location of the Push-Pull boundary
changes
Significant cost savings are achieved.
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Problems with Local Optimization
Prevalent strategy for many companies:
try to keep as much inventory close to the customers
hold some inventory at every location
hold as much raw material as possible.
This typically yields leads to:
Low inventory turns
Inconsistent service levels across locations and products, and
The need to expedite shipments, with resulting increased transportation costs
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Consider a two-tier supply chain
Items shipped from manufacturing facilities to primary warehouses
From there, they are shipped to secondary warehouses and finally to retail outlets
How to optimally position inventory in the supply chain?
Should every SKU be positioned both at the primary and secondary warehouses?, OR
Some SKU be positioned only at the primary while others only at the secondary?
Integrating Inventory Positioning and Network Design
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Integrating Inventory Positioning and Network Design
Sample plot of each SKU by volume and demand
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Three Different Product Categories
High variability - low volume products
Low variability - high volume products, and
Low variability - low volume products.
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Supply Chain Strategy Different for the Different Categories
High variability low volume products
Inventory risk the main challenge for
Position them mainly at the primary warehouses
demand from many retail outlets can be aggregated reducing inventory costs.
Low variability high volume products
Position close to the retail outlets at the secondary warehouses
Ship fully loaded tracks as close as possible to the customers reducing transportation
costs.
Low variability low volume products
Require more analysis since other characteristics are important, such as profit margins,
etc.
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Resource Allocation
Supply chain master planning
The process of coordinating and allocating production, and distribution strategies
and resources to maximize profit or minimize system-wide cost
Process takes into account:
interaction between the various levels of the supply chain
identifies a strategy that maximizes supply chain performance
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Global Optimization and DSS
FACTORS TO CONSIDER
Facility locations: plants, distribution centers and demand points
Transportation resources including internal fleet and common carriers
Products and product information
Production line information such as min lot size, capacity, costs, etc.
Warehouse capacities and other information such as certain technology (refrigerators) that a
specific warehouse has and hence can store certain products
Demand forecast by location, product and time.
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Focus of the Output
Sourcing Strategies:
where should each product be produced during the planning horizon, OR
Supply Chain Master Plan:
production quantities, shipment size and storage requirements by product,
location and time period.
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The Extended Supply Chain: From Manufacturing to
Order Fulfillment
The extended supply chain: from manufacturing to order fulfillment
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Questions to Ask During the Planning Process
Will leased warehouse space alleviate capacity problems?
When and where should the inventory for seasonal or promotional demand be built and stored?
Can capacity problems be alleviated by re-arranging warehouse territories?
What impact do changes in the forecast have on the supply chain?
What will be the impact of running overtime at the plants or out-sourcing production?
What plant should replenish each warehouse?
Should the firm ship by sea or by air. Shipping by sea implies long lead times and therefore requires
high inventory levels. On the other hand, using air carriers reduces lead times and hence inventory
levels but significantly increases transportation cost.
Should we rebalance inventory between warehouses or replenish from the plants to meet unexpected
regional changes in demand?
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SUMMARY
Network Planning Characteristics
Few Few Very Few Users
Short Short Very Short Implementation
Medium Medium High ROI
Monthly/Weekly Monthly/Weekly Yearly Frequency
Classes Item Family Aggregation Level
Months Months Years Planning Horizon
Production Distribution Safety stock Infrastructure Decision focus
Resource Allocation Inventory Positioning and
Management
Network Design
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SUMMARY
Optimizing supply chain performance is difficult
conflicting objectives
demand and supply uncertainties
supply chain dynamics.
Through network planning, firms can globally optimize supply chain performance
Combines network design, inventory positioning and resource allocation
Consider the entire network
account production
Warehousing
transportation inventory costs
service level requirements.
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SUMMARY
Demonstrate applicability of risk pooling and postponement, EOQ
modeling, and inventory sizing to improve customer service in make-to-
order job shop setting
Demonstrates value from getting and looking at data
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Case: H. C. Starck, Inc.
Background and context
Why are lead times long?
How might they be reduced?
What are the costs? benefits?
Stephen C. Graves Copyright 2003
All Rights Reserved
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Metallurgical Products
Make-to-order job shop operation
600 SKUs made from 4 sheet bar (4 alloys)
Goal to reduce 7-week customer lead times
Expediting is ad hoc scheduling rule
Six months of inventory
Manufacturing cycle time is 2 3 weeks
Limited data
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ProductionOrder #1
4 Bar 1/4 Plate 1/8 Plate 0.015 Sheet Tubing
ProductionOrder #2 ProductionOrder #3
Clean Roll Anneal
Sheet Bar
(forgedingot)
Repeat
0sns3
Finish
(cut, weld, etc.)
Production Orders
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Why Is Customer Lead Time 7 Weeks?
From sales order to process order takes 2 weeks
Typical order requires multiple process orders, each 2 3 weeks
Expediting as scheduling rule
Self fulfilling prophecy?
All Rights Reserved
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What Are Benefits From Reducing Lead Time?
New accounts and new business
Protect current business from switching to substitutes or Chinese
competitor
Possibly less inventory
Better planning and better customer service
Savings captured by customers?
All Rights Reserved
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How Might Starck Reduce Customer Lead
Times?
Hold intermediate inventory
How would this help?
How much? Where?
Eliminate paper-work delays
Reduce cycle time for each process order
How? What cost?
All Rights Reserved
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Two-Product Optimal Cycle Time
( )
( )
( )
*
*
2 2
2
2 400 400
0.02 years
.06 100 526000 .06 125 183000
B F B B F F
B F
B B F F
K K h D h D
Cost T T
T
K K
T
h D h D
T
-
/ \
= - -
, 1
\
-
=
-
-
= =
-
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Intermediate Inventory
Characterize demand by possible intermediate for each of two alloys
Pick stocking points based on risk pooling benefits, lead time reduction,
volume
Determine inventory requirements based on inventory model, e. g. base
stock
All Rights Reserved
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Popularity Material Gauge- Description Jan Feb Mar Apr May Jun Jul Aug Sep Total Cum%
1 1011 0.002 Foil 618 1,079 1,215 1,188 1,020 290 1,590 849 1,017 8,866 22%
2 1004 0.015 Sheet 68 611 1,263 167 1,917 803 321 377 404 5,931 37%
3 1003 0.005 Sheet 263 576 584 812 617 969 572 359 909 5,661 50%
4 1029 0.500 Disk - 10"dia 275 0 353 0 581 0 530 414 1,017 3,170 58%
5 1009 0.030 Sheet 0 122 614 275 422 360 686 246 177 2,902 65%
6 1008 0.040 Sheet 321 101 191 486 8 98 263 176 690 2,334 71%
7 1002 0.010 Sheet 20 56 287 179 41 204 560 143 276 1,766 76%
8 1014 0.250 Plate 6 12 0 770 0 752 0 0 174 1,714 80%
9 1007 0.060 Plate 0 146 32 117 129 414 581 26 191 1,636 84%
10 1012 0.125 Plate 228 8 32 90 432 17 8 0 450 1,265 87%
11 1013 0.150 Plate 1,100 0 0 0 0 35 0 0 0 1,135 90%
12 1028 0.500 Ring- 10"ODx 8.5"ID 0 189 0 48 293 93 0 0 174 797 92%
13 1010 0.020 Sheet 0 54 102 183 45 54 126 92 119 775 94%
14 1017 0.750 Tube- 3/4" 0 0 0 8 12 558 0 0 12 590 95%
15 1015 0.375 Plate 0 0 0 0 0 0 375 0 0 375 96%
16 1018 0.015 Tube- 1.0"OD 8 0 0 0 0 230 0 41 0 279 97%
17 1001 0.005 Sheet - 1.0"x 23.75" 171 0 0 20 0 0 0 17 0 208 97%
18 1016 0.500 Tube- 0.50"OD 3 0 0 51 6 54 33 27 33 207 98%
19 1023 0.010 Sheet - 1.0"x 23.75" 0 99 14 18 0 0 0 0 0 131 98%
20 1027 0.015 Sputter Target - 2.0"x 5.0" 0 105 0 0 0 0 0 0 0 105 98%
Other - - 17Other Items 217 36 57 86 100 40 52 43 35 666 100%
40,513
1999InvoicedSales - Pounds per month
Alloy 1
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Sales
Rank Material Gauge- Description Jan Feb Mar Apr May Jun Jul Aug Sep Total Cum%
1 2040 0.015 WeldedTube.75"OD 296 936 2,989 1,366 2,468 989 657 528 1,392 11,623 27%
2 2031 0.020 Sheet Annealed 761 521 826 671 889 1,004 3,975 27 7 8,681 48%
3 2035 0.030 Sheet Annealed 1,638 116 1,138 634 524 579 1,672 703 517 7,520 65%
4 2041 0.020 WeldedTube.75"OD 0 50 316 3 379 0 2,856 0 0 3,604 74%
5 2043 0.015 WeldedTube1.0"OD 0 0 480 444 0 77 118 343 0 1,462 77%
6 2027 0.060 PlateAnnealed 0 0 277 323 60 0 504 12 205 1,382 80%
7 2050 0.015 WeldedTube1"ODWithCap 0 0 0 1,003 0 0 176 0 0 1,179 83%
8 2029 0.045 Sheet Annealed 137 122 430 18 37 16 0 368 5 1,133 86%
9 2026 0.010 Sheet Annealed 0 0 435 0 251 412 0 0 0 1,098 88%
10 2051 0.022 WeldedTube1.25"OD 0 0 0 1,014 0 0 0 0 0 1,014 91%
11 2025 0.002 Foil Annealed 551 0 0 0 0 0 0 0 0 551 92%
12 2034 0.125 PlateAnnealed 0 35 78 63 34 0 0 208 0 418 93%
13 2045 0.030 WeldedTube1.0"OD 0 0 370 0 0 1 0 0 41 412 94%
14 2044 0.020 WeldedTube1.0"OD 0 0 0 32 241 108 4 0 0 386 95%
15 2047 0.030 WeldedTube1.5O"OD 0 255 100 0 0 0 0 0 0 355 96%
16 2039 0.020 WeldedTube.50"OD 0 0 181 142 0 0 0 0 0 323 96%
17 2052 0.035 Tube1.25"OD 0 0 302 0 0 0 0 0 0 302 97%
18 2036 0.015 Sheet Annealed 108 0 13 56 0 27 0 0 1 205 98%
19 2046 0.015 WeldedTube1.5"OD 0 0 0 0 40 0 133 0 0 173 98%
20 2012 0.045 4"Repair Disk 0 8 6 15 0 84 7 9 8 137 98%
Other - - 35Other Items 77 118 64 67 113 133 44 24 112 753 100%
42,709
1999InvoicedSales- Poundsper Month
Alloy 2
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A l l o y # 1 P r o d u c t H e i r a r c h y
( T o p 2 0 I t e m s - 9 8 % o f S a l e s )
4
8
1 2
1 5
1 0
1 1
2
5
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1 3
1 4
1 6
1 8
2 0
1
3
7
1 7
1 9
0 . 0 3 0 " S h e e t
2 , 0 5 3 l b s / m o
2 8 % R S D
1 / 8 " P l a t e
4 , 1 0 4 l b s / m o
3 0 % R S D
1 / 4 " P l a t e
5 , 4 6 3 l b s / m o
2 3 % R S D
4 " B a r
6 , 8 1 7 l b s / m o
2 5 % R S D
All Rights Reserved
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A l l o y # 2 P r o d u c t H e i r a r c h y
( T o p 2 0 I t e m s - 9 8 % o f S a l e s )
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1 / 8 " P l a t e
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5 9 % R S D
1 / 4 " P l a t e
6 , 7 2 6 l b s / m o
5 9 % R S D
4 " B a r
7 , 4 7 4 l b s / m o
5 9 % R S D
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Sales
Rank Material Gauge - Description Jan Feb Mar Apr May Jun Jul Aug Sep
Total
( Pounds)
Monthly
Average
Standard
Deviation %RSD
From 0.030" Sheet
1 1011 0.002 Foil 618 1,079 1,215 1,188 1,020 290 1,590 849 1,017 8,866 985 372 38%
3 1003 0.005 Sheet 263 576 584 812 617 969 572 359 909 5,661 629 235 37%
7 1002 0.010 Sheet 20 56 287 179 41 204 560 143 276 1,766 196 168 85%
19 1023 0.010 Sheet - 1.0"x 23.75" 0 99 14 18 0 0 0 0 0 131 15 32 223%
17 1001 0.005 Sheet - 1.0"x 23.75" 171 0 0 20 0 0 0 17 0 208 23 56 242%
Monthly Subtotal 1,072 1,810 2,100 2,217 1,678 1,463 2,722 1,368 2,202
90% Input required at yield 1,191 2,011 2,333 2,463 1,864 1,626 3,024 1,520 2,447 18,480 2,053 569 28%
From 0.125" Plate
0.030"Sheet to Supply Above 1,191 2,011 2,333 2,463 1,864 1,626 3,024 1,520 2,447 18,480 2,053 569 28%
2 1004 0.015 Sheet 68 611 1,263 167 1,917 803 321 377 404 5,931 659 594 90%
16 1018 0.015 Tube - 1.0"OD 8 0 0 0 0 230 0 41 0 279 31 76 245%
20 1027 0.015 Sputter Target - 2.0"x 5.0" 0 105 0 0 0 0 0 0 0 105 12 35 300%
18 1016 0.015 Tube - 0.50"OD 3 0 0 51 6 54 33 27 33 207 23 22 94%
14 1017 0.015 Tube - 3/4" 0 0 0 8 12 558 0 0 12 590 66 185 282%
13 1010 0.020 Sheet 0 54 102 183 45 54 126 92 119 775 86 54 63%
5 1009 0.030 Sheet 0 122 614 275 422 360 686 246 177 2,902 322 224 70%
6 1008 0.040 Sheet 321 101 191 486 8 98 263 176 690 2,334 259 214 83%
9 1007 0.060 Plate 0 146 32 117 129 414 581 26 191 1,636 182 194 107%
90% Input Required at Yield 1,768 3,500 5,039 4,167 4,893 4,663 5,594 2,783 4,525 36,932 4,104 1213 30%
From 0.250" Plate
0.125"Plate to Supply Above 1,768 3,500 5,039 4,167 4,893 4,663 5,594 2,783 4,525 36,932 4,104 1213 30%
10 1012 0.125 Plate 228 8 32 90 432 17 8 0 450 1,265 141 185 131%
11 1013 0.150 Plate 1,100 0 0 0 0 35 0 0 0 1,135 126 365 290%
From 4.0" Sheet Bar
0.250"Plate to Supply Above 3,870 4,385 6,339 5,321 6,656 5,894 7,002 3,479 6,219 49,165 5,463 1273 23%
8 1014 0.250 Plate 6 12 0 770 0 752 0 0 174 1,714 190 328 172%
15 1015 0.375 Plate 0 0 0 0 0 0 375 0 0 375 42 125 300%
4 1029 0.500 Disk - 10"dia 275 0 353 0 581 0 530 414 1,017 3,170 352 337 96%
12 1028 0.500 Ring- 10"OD x 8.5"ID 0 189 0 48 293 93 0 0 174 797 89 107 121%
Alloy 1 Stephen C. Graves Copyright 2003
All Rights Reserved
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Sales
Rank Material Gauge - Description Jan Feb Mar Apr May Jun Jul Aug Sep
Total
( Pounds)
Monthly
Average
Standard
Deviation %RSD
From 0.030" Sheet
11 2025 0.002 Foil Annealed 551 0 0 0 0 0 0 0 0 551 61 184 300%
9 2026 0.010 Sheet Annealed 0 0 435 0 251 412 0 0 0 1,098 122 190 156%
Monthly Subtotal 551 0 435 0 251 412 0 0 0
90% Input required at yield 612 0 484 0 279 458 0 0 0 1,833 204 256 126%
From 0.015" Sheet
1 2040 0.015 Welded Tube .75"OD 296 936 2,989 1,366 2,468 989 657 528 1,392 11,623 1291 900 70%
5 2043 0.015 Welded Tube 1"OD 0 0 480 444 0 77 118 343 0 1,462 162 202 125%
7 2050 0.015 Welded Tube 1"OD WithCap 0 0 0 1,003 0 0 176 0 0 1,179 131 332 254%
18 2036 0.015 Sheet Annealed 108 0 13 56 0 27 0 0 1 205 23 37 163%
19 2046 0.015 Welded Tube 1.5"OD 0 0 0 0 40 0 133 0 0 173 19 45 232%
Monthly Subtotal 404 936 3,483 2,869 2,508 1,093 1,084 871 1,393
90% Input required at yield 449 1,040 3,870 3,188 2,787 1,215 1,205 967 1,548 16,269 1,808 1175 65%
From 0.125" Sheet
0.030" Sheet to Supply Above 612 0 484 0 279 458 0 0 0 1,833 204 256 126%
0.015" Sheet to Supply Above 449 1,040 3,870 3,188 2,787 1,215 1,205 967 1,548 16,269 1808 1175 65%
2 2031 0.020 Sheet Annealed 761 521 826 671 889 1,004 3,975 27 7 8,681 965 1184 123%
4 2041 0.020 Welded Tube .75"OD 0 50 316 3 379 0 2,856 0 0 3,604 400 933 233%
14 2044 0.020 Welded Tube 1.0"OD 0 0 0 32 241 108 4 0 0 386 43 83 193%
16 2039 0.020 Welded Tube .50"OD 0 0 181 142 0 0 0 0 0 323 36 72 200%
10 2051 0.022 Welded Tube 1.25"OD 0 0 0 1,014 0 0 0 0 0 1,014 113 338 300%
3 2035 0.030 Sheet Annealed 1,638 116 1,138 634 524 579 1,672 703 517 7,520 836 533 64%
13 2045 0.030 Welded Tube 1.0"OD 0 0 370 0 0 1 0 0 41 412 46 122 268%
15 2047 0.030 WELDED TUB E 1.5O"OD 0 255 100 0 0 0 0 0 0 355 39 87 221%
17 2052 0.035 Tube 1.25"OD 0 0 302 0 0 0 0 0 0 302 34 101 300%
8 2029 0.045 Sheet Annealed 137 122 430 18 37 16 0 368 5 1,133 126 163 130%
20 2012 0.045 4"Repair Disk 0 8 6 15 0 84 7 9 8 137 15 26 171%
From 0.250" Plate
0.125" Sheet to Supply Above 3,997 2,347 8,913 6,352 5,706 3,849 10,798 2,305 2,363 46,630 5181 3053 59%
6 2027 0.060 Plate Annealed 0 0 277 323 60 0 504 12 205 1,382 154 183 119%
12 2034 0.125 Plate Annealed 0 35 78 63 34 0 0 208 0 418 46 67 145%
From 4.0" Sheet Bar
0.250" Plate to Supply Above 4,996 2,978 11,585 8,423 7,251 4,811 14,128 3,156 3,210
Alloy 2
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Material
Monthly
Demand
Monthly
Sigma
Period
(Weeks)
Average
(Pipeline)
Period
Sigma
Service
Level
Reliability
Factor Buf f er Saf ety Total
Alloy#1
0.125"Plate 4,104 1,213 1 947 583 95% 90% 958 191 2,100
0.030"Sheet 2,053 569 1 474 273 95% 90% 450 92 1,020
Alloy#2
0.125"Plate 5,181 3,053 1 1,196 1,467 95% 90% 2,412 361 3,970
0.015"Sheet 1,808 1,175 1 417 564 95% 90% 928 135 1,480
Estimated Inventory Requirements
All Rights Reserved
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306 SCM Unit III

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LSM-306 Supply Chain Management

Master of Business Administration

Net Lead Time = SI + T - S

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