Inventory

Policies:
- One on one
- Safety stock

Manufacturing
methodologies

Pros

Cons

Make to Stock
Could be Push System, they
already have it
Make to order
Could be pull

Shorter lead time to customer

Smoother production Schedule

More inventory held

Could hold wrong inventory (product nobody wants)

Lower overall inventory level

-
Longer lead to customer
Always have the right item since its built per
-
Production Schedule will fluctuate with demand so
order
capacity must be flexible
Long term contracts and
Hedge against fluctuations in orders,
-
Can be costly
options contracts(initial pay) Divides risk between suppliers, distributors
-
Huge risk to supply becoming obsolete
and portfolio (multiple
and manufacturers
contracts, for what i need)
OEM contracts/outsourcing
-
Closer emphasis on design
-
Quality issues
marketing and core competencies
-
Lot of OEMs subject to tariffs, political risks and
-
Off loads cost associated with
more SC problems
inventory
Supply contracts
-
Buy-back: Seller buys back unsold goods from the buyer for an agreed-upon time
-
Revenue Sharing: Part of sellers revenue is based don number sold
-
Quantity flexibility: Seller buys back up to a certain number of items at full price
-
Sales rebate: Buyer pays seller a rebate for all items over a certain quantity sold
Reasons to hold it
-
Unknown demand customer variability
-
Uncertainty in suppliers (quality, quantity,
-
Economies of scale
delivery, lead time)
-
Long lead time
-
Incentives (cost differential)



Where to hold it
-
Retail site
-
Manufacturing
-
Distributors
-
Supplier
What it hold

-
-

Finished Goods
Sub-assembles

Raw materials

Managing Supply Chain

Forecasting Methods

Push (MRP)
-
Integrated
-
Hard to change orders
Planning in advance, forecast
-
Computer implementation
-
Severe impacts with production disturbance
based,
e
asier,
m
ore
Production
variability
Control Pull (JIT)
-
Inherent cap on WIP
-
Cant work on complex product without a master
- Low CV is Requested order (LEAN)
-
Less cycle variability
production scale
better
More effort, coordination,
-
Maintains flexibility
low variability, reveals
-
Limits inventory
quality problems
Judgment
-
Profit margins
Experts, Lack of data,
-
More multisite production
Combination
-
Increasing competition
Reasons for focusing

-
World economy with customization
on the SC
-
Customer service including fast delivery
Market research
Focus group, representative
Time-series
Use past values
Trends, seasonality, cycles

Causes of variability:

- Process variance
- Minimum stock
- Supply variance
Causal
Use another characteristics - Demand variance
to explain this one

Information
_ 90% fill-rate, good?,
depends on the other 10%
Operation

-
-

Three ways of dealing with variability

- Add inventory
- Increase cycle time estimates
- Add capacity
Supply chain implies linear relationship
Better suppply web or supply network

-
-

Inaccurate delivery status data

Ineffective information systems

-
-

Poor coordination
Incomplete shipment methods analysis

-
-
-

Product/process design without SC considerations

Separate SC design form operational decisions
Incomplete SC

Design for manufacturability (cost

efficient manufacture)
Design for quality
Incorrect assessment of inventory
costs
Organizational barriers (SILO)

-
-
-
-

Reduce safety stock

Increase service levels
Reduce overhead costs
Reduces customer lead time

Increase customer lead time

-
-
-

Increase safety stock

Reduce service levels
Increase overhead costs

-
-
-

-

Strategic and design

Three types of data:

- You want
- You need
- You have
Improvement steps
- Benchmarking
performance
- Controlling
uncertainty
- Planning changes
Misaligned metrics
Inadequate definition of customer
service
Ignoring uncertainty
Simple inventory
Discriminate against internal
customers

-
-

Inventory Centralized (global)

Systems
-
Decentralized (local)
Transportation
depends

Product/Situation
OUTSOURCING

Dependent on
knowledge & capacity

Independent for knowledge,

dependent on capacity

Independent for knowledge,

Independent for capacity

Modular (components standard, interchangeable,

determined by components performance)

Outsourcing is risky
- Design
Outsourcing is very
risky

Outsourcing is an opportunity

Outsourcing might reduce cost

Outsourcing is an option

Keep production internal

Integral(highly related components specialized

, not on the shelf, system performance)

Decisions can be based on five criteria
Customer importance
Component clock-speed
Capable suppliers
Architecture
Competitive position

Depending on the situation, decision can include

Outsource
Keep in house
Acquire capability
Develop a strategic partnership
Develop a supplier

Actions to improve SC
Supplier Performance

Product

Process

Use common components and

subassembles
Follow industry standards

Reward good performance (based on ship date ,

not delivery date)
Measure transportation performance separately

-
-
-
-

Remove bottlenecks
Size buffers appropriately
Adjust FGI safety stock
Change transportation mode

-
-
-
-

Manufacturing
Customer Demand

Lower tolerances
Pool engineering change orders
Reduce product offerings options
Design for localization

Exponential:

Triple exponential: Regression:

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!
= ! + !
! = + (1 )(!!! )

!

Double Exponential


!
! = ! + (1 )(!!! + !!! )

!!! = ! + ! ! = (! !!! ) + (1 )(!!! )
! =
!

!
! = (! !!! ) + (1 )!!!
!!! = (! + ! )!!!!!


Safety Stock
= + !

Information
Get things to the right place and right time
Logistics
Reductions in unit cost as the size of facility and usage levels of other
Economies of scale
Lead time
Aggregate forecast
Moving Average
Stationary
Buffer
KISS
Tactical
Strategically
Customer deliveries
SKU
FGI
QFD
EOQ
Fill-rate
Silo organization
Why sub-optimizing SC doesnt work?
Physically constraint inventory
Inventory Reductions techniques
MOQ multiple order quantity

inputs increase
Time required for the product to get to the next echelon
Ussually more accurate
Lags behind trends
Independent time
Reduce, less
Keep it simple, stupid!
Shorter term horizon
Longer term horizon
Can impact demand, demand goes to another place
Stock keeping unit
Finished good inventory
Convert need into engineering characteristics
Economic order quantity
% Orders satisfied
Every department dont care of the other

Each piece will hold safety stock, increase in bullwhip effect, higher
prices to end customers
Bigger facility
Safety stock (tight management of usage rates, leads times and ST)
Counting practices (HM,C,,lLt racked as close to real time, SM,nC, sL
every month or quarter)
Shift inventory (Suppliers and retailers to hold more inventory , MOQ)