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Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Learning Objectives
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Role of Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Role of Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Role of Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Determining the Appropriate Level
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Demand Distribution Over L
Periods
DL = DL s L = Ls D
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Measuring Product Availability
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Replenishment Policies
Continuous review
• Periodic review
Inventory status is checked at regular periodic intervals
Order is placed to raise the inventory level to a specified
threshold
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Cycle Service Level
and Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Cycle Service Level
and Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Cycle Service Level
and Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Cycle Service Level
and Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Cycle Service Level
and Fill Rate
DL = DL = 2 ´ 2,500
s L = Ls D = 2 ´ 500 = 707
= NORMDIST(6,000,5,000,707,1) = 0.92
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Fill Rate Given a
Replenishment Policy
fr = 1 – ESC/Q = (Q – ESC)/Q
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Fill Rate Given a
Replenishment Policy
é æ ss öù æ ss ö
ESC = –ss ê1– Fs ç ÷ú + s L f s ç ÷
êë è s L øúû ès L ø
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Fill Rate Given a
Replenishment Policy
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Fill Rate Given a
Replenishment Policy
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Cycle Service Level
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Cycle Service Level
ss = FS–1(CSL) ´ s L = FS–1(CSL) ´ Ls D
= NORMSINV (CSL) ´ Ls D
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Cycle Service Level
DL = DL = 2 ´ 2,500 = 5,000
s L = Ls D = 2 ´ 500 = 707
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Fill Rate
ESC = (1 – fr)Q
• No equation for ss
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given Desired
Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Fill Rate
é æ ss öù æ ss ö
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluating Safety Inventory Given
Desired Fill Rate
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Desired Product Availability
and Uncertainty
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Desired Product Availability
and Uncertainty
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Benefits of Reducing Lead Time
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Supply Uncertainty
on Safety Inventory
DL = DL s L = Ls D2 + D 2 sL2
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Lead Time Uncertainty
on Safety Inventory
= 7 ´ 5002 + 2,5002 ´ 72
= 17,500
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Lead Time Uncertainty
on Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Aggregation on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Aggregation on
Safety Inventory
k
DC = å Di ; ( )
var DC = ås i2 + 2å rijs is j ;
k
i=1
i=1 i> j
s DC = var DC ( )
DC = kD s DC = k s D
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Aggregation on
Safety Inventory
FS–1(CSL) ´ L ´ H æ k ö
= ´ ççås i – s D ÷÷
C
DC è i=1 ø
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Aggregation on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Aggregation on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Correlation on
Value of Aggregation
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Correlation on
Value of Aggregation
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Trade-offs of Physical Centralization
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Trade-offs of Physical Centralization
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Specialization
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Coefficient of Variation on
Value of Aggregation
Motors Cleaner
Inventory is stocked in each store
Mean weekly demand per store 20 1,000
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Product Substitution
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Component Commonality
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Value of Component Commonality
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Value of Component Commonality
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Postponement
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Value of Postponement
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Replenishment Policies
on Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Replenishment Policies on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Replenishment Policies on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Impact of Replenishment Policies on
Safety Inventory
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Evaluation Safety Inventory for a Periodic
Review Policy
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Role of IT in Inventory Management
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Estimating and Managing Safety Inventory
in Practice
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Summary of Learning Objectives
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra