Module 4 - PowerPoint PPT Presentation

About This Presentation
Title:

Module 4

Description:

Module 4 – PowerPoint PPT presentation

Number of Views:68
Avg rating:3.0/5.0
Slides: 14
Provided by: janv58
Category:
Tags: module | stock

less

Transcript and Presenter's Notes

Title: Module 4


1
Operations Management Performance Modeling
  • 1 Operations Strategy
  • 2 Process Analysis
  • 3 Lean Operations
  • 4 Supply Chain Management
  • Class 5a Inventories Economies of Scale
  • Class 5b Dealing with Uncertainty role of
    Centralization
  • The impact of uncertainty safety stocks
  • Centralization pooling benefits
  • 5 Capacity Management in Services
  • 6 Total Quality Management
  • 7 Business Process Reengineering

2
South Face warehousesService levels inventory
management
  • The South Face has 4 warehouses which experience
    a demand that is not steady from one week to the
    next. Weekly demand is in fact normally
    distributed with a mean of 5,000 and a standard
    deviation of 1,500. SFs order lead time is two
    weeks. Fixed order costs are 2,000/order and it
    costs 50 to hold one jacket in inventory during
    one year.
  • If SF uses the ordering policy discussed last
    class, what will the probability of running out
    of stock in a given cycle be?
  • SF would like this probability to be no higher
    than 5 for customer satisfaction. What ordering
    policy would you recommend for SF?

3
Safety Stocks
Inventory on hand I(t)
Q
Q
order
order
order
ROP
mean demand during supply lead time m R L
ss
safety stock ss
0
Time t
L
4
Hedge against demand uncertainty with safety
stocks
  • L Supply lead time,
  • DN(R, sR) Demand per unit time is normally
    distributed
  • with mean R and standard deviation sR ,
  • Cycle service level P(no stock out)
  • P(demand during lead time lt ROP)
  • P(N(0,1) lt z (ROP- m)/sLTD)
  • F(z) use tables to find z
  • Safety stock ss z sLTD
  • Reorder point ROP RL ss

5
The standard normal distribution F(z)
  • Transform X N(m,s) to z N(0,1)
  • z (X - m) / s.
  • F(z) Prob( N(0,1) lt z)
  • Transform back, knowing z
  • X m zs.

6
Determining the required Safety Stock at each
warehouse of the South Face
  • DATA
  • R 5,000 jackets/ week sR 1,500 jackets/
    week
  • H 50 / jacket, year
  • S 2,000 / order L 2 weeks
  • QUESTION What should safety stock be to insure a
    desired cycle service level of 95?
  • ANSWER
  • 1. Determine s lead time demand
  • 2. Required of standard deviations z
  • 3. Answer Safety stock

7
Comprehensive Financial EvaluationWarehouse
Inventory Costs of the South Face
  • 1. Cycle Stock (Economies of Scale)
  • 1.1 Optimal order quantity
  • 1.2 of orders/year
  • 1.3 Annual ordering cost per warehouse
    114,017.
  • 1.4 Annual cycle stock holding cost/w.h.
    114,017.
  • 2. Safety Stock (Uncertainty hedge)
  • 2.1 Safety stock per warehouse 3,500
  • 2.2 Annual safety stock holding cost/w.h.
    174,982.
  • 3. Total Costs for 4 warehouses 4 (114,017
    114,017 174,982)
  • 1,612,069.

8
Learning Objectives safety stocks
  • Safety stock increases (decreases) with an
    increase (decrease) in
  • demand variability or forecast error,
  • delivery lead time for the same level of service,
  • delivery lead time variability for the same level
    of service.

9
The Effect of Centralization
  • Weekly demand per warehouse 5,000 jackets/
    week
  • with standard deviation 1,500 / week
  • H 50 / jacket, year
  • S 20,000 / order
  • Supply lead time L 2 weeks
  • Desired cycle service level F(z) 95.
  • The South Face decides to merge all of its
    warehouses.
  • m
  • s

10
The Effect of Pooling pairs of warehouses
  • R 10,000 widgets/week s Sqrt(2) 4,000
    5,657 widgets/week
  • Optimal order quantity Q per 2-warehouse
    20,396 widgets/order.
  • Annual ordering cost per 2-warehouse 50,990.
  • s lead time demand 6,928 widgets.
  • Safety stock per 2-warehouse 11,432 widgets.
  • Reorder point 26,432 widgets.
  • Average inventory 2-warehouse 21,630
    widgets.
  • Average cycle time 2.16 weeks.
  • Annual holding cost per 2-warehouse 108,150.
  • Total average inventory across two 2-warehouses
    43,260 widgets.
  • Total annual cost across two 2-warehouses
    318,280.

11
Comprehensive Financial Evaluation of
centralizing Four Warehouses into One
  • R 20,000 jackets/week sR Sqrt(4) 1,500
    3,000 jackets/week
  • 1. Cycle Stock
  • Optimal order quantity Q consolidated warehouse
    9,121 jackets/order.
  • Annual ordering cost 228,035.
  • 2. Safety Stock
  • s lead time demand 4,242 jackets.
  • Safety stock consolidated warehouse 7,000
    jackets.
  • Reorder point 47,000 jackets.
  • Average inventory consolidated warehouse
    11,560 jackets.
  • Average flow time 0.578 weeks.
  • Annual holding cost 578,000.
  • Total annual cost consolidated warehouse
    806,034.

12
Supply Chain of IBM PC Europe
  • Build to Plan (BTP) vs.
  • Late Customization (LC) vs.
  • Build to Order (BTO) vs.
  • Exploiting component commonality(FLEX)
  • Physical Pooling of transhipment points

Source Feigin, An, Connors and Crawford, ORMS
Today April 96
13
Learning Objectives centralization/pooling
  • Different methods to achieve pooling
    efficiencies
  • Physical centralization
  • Information centralization
  • Specialization
  • Raw material commonality (postponement/late
    customization)
  • Cost savings are sqrt( of locations pooled).

14
Postponement Commonality HP Laserjet
15
MidTerm Results
Median 85, Stdev 10, Max 99
25
20
15
Frequency
10
5
0
60
69
79
89
99
Write a Comment
User Comments (0)
About PowerShow.com