The impact of "Never Run Out" policy assured supply chain with dual reorder point expediting

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2008.Includes bibliographical references (leaves 64-65).Managing a big supply chain for one of the largest quick service restaurant companies, especially when the company has a policy called "Never Run Out," is very challenging. A traditional way of managing inventory requires high level of safety stock if high level of uncertainty is involved. Sources of uncertainty include variability in demand from frequent promotions or seasonal effect, variability in order lead time from using low-cost mode of transportation, or lack of information sharing. This project developed an expediting policy with dual reorder points with demand threshold and tested the policy with a Monte Carlo simulation. Previous research on two reorder points provide great foundation for this study but they lack consideration on demand variability and approaches to set up reorder points. We propose an algorithm with a demand threshold to trigger an expedited order and heuristic approaches to develop reorder points where the total cost can be minimized while service requirements are met.by Gil Su Lee.M.Eng.in Logistic

Supply chain design: a conceptual model and tactical simulations

In current research literature, supply chain management (SCM) is a hot topic breaching the boundaries of many academic disciplines. SCM-related work can be found in the relevant literature for many disciplines. Supply chain management can be defined as effectively and efficiently managing the flows (information, financial and physical) in all stages of the supply chain to add value to end customers and gain profit for all firms in the chain. Supply chains involve multiple partners with the common goal to satisfy customer demand at a profit. While supply chains are not new, the way academics and practitioners view the need for and the means to manage these chains is relatively new. Very little literature can be found on designing supply chains from the ground up or what dimensions of supply chain management should be considered when designing a supply chain. Additionally, we have found that very few tools exist to help during the design phase of a supply chain. Moreover, very few tools exist that allow for comparing supply chain designs. We contribute to the current literature by determining which supply chain management dimensions should be considered during the design process. We employ text mining to create a supply chain design conceptual model and compare this model to existing supply chain models and reference frameworks. We continue to contribute to the current SCM literature by applying a creative application of concepts and results in the field of Stochastic Processes to build a custom simulator capable of comparing different supply chain designs and providing insights into how the different designs affect the supply chain’s total inventory cost. The simulator provides a mechanism for testing when real-time demand information is more beneficial than using first-come, first-serve (FCFS) order processing when the distributional form of lead-time demand is derived from the supply chain operating characteristics instead of using the assumption that lead-time demand distributions are known. We find that in many instances FCFS out-performs the use of real-time information in providing the lowest total inventory cost