The effect of foreknowledge of demand in case of a restricted capacity: the single-stage, singleproduct case with lost sales

Foreknowledge of demand is useful in the control of a production-inventory system. Knowingthe customer orders in advance makes it possible to anticipate properly. It is an importantcondition to produce and deliver the right quantity of the right product “just-in-time”. Itreduces the need of safety stock and spare capacity. But the question of the effectiveness offoreknowledge is not an easy one. Having foreknowledge of the customer orders does notremove the demand uncertainty completely. The effect of foreknowledge has to be consideredin a stochastic dynamic setting. The subject of this paper is the effect of foreknowledge incombination with a restricted production capacity. The lost-sales case is considered. The mainresult is that for high utilization rates and small forecast horizon, the inventory reduction dueto foreknowledge is equal to (1- pi).h, with h the forecast horizon

The boomerang returns? Accounting for the impact of uncertainties on the dynamics of remanufacturing systems

Recent years have witnessed companies abandon traditional open-loop supply chain structures in favour of closed-loop variants, in a bid to mitigate environmental impacts and exploit economic opportunities. Central to the closed-loop paradigm is remanufacturing: the restoration of used products to useful life. While this operational model has huge potential to extend product life-cycles, the collection and recovery processes diminish the effectiveness of existing control mechanisms for open-loop systems. We systematically review the literature in the field of closed-loop supply chain dynamics, which explores the time-varying interactions of material and information flows in the different elements of remanufacturing supply chains. We supplement this with further reviews of what we call the three ‘pillars’ of such systems, i.e. forecasting, collection, and inventory and production control. This provides us with an interdisciplinary lens to investigate how a ‘boomerang’ effect (i.e. sale, consumption, and return processes) impacts on the behaviour of the closed-loop system and to understand how it can be controlled. To facilitate this, we contrast closed-loop supply chain dynamics research to the well-developed research in each pillar; explore how different disciplines have accommodated the supply, process, demand, and control uncertainties; and provide insights for future research on the dynamics of remanufacturing systems

A Case Study Of E-Supply Chain & Business Process Reengineering Of A Semiconductor Company In Malaysia

Penglibatan e-perniagaan dalam rantaian bekalan telah mewujudkan e-rantaian bekalan yang baru (e-SC) di firma-firma tempatan dan global. Due to globalization and advancement in information technology (IT), companies adopt best practices in e-business and supply chain management to be globally competitive as both are realities and prospects in 21st century

Modeling Overstock

Two main problems have been emerging in supply chain management: the increasing pressure to reduce working capital and the growing variety of products. Most of the popular indicators have been developed based on a controlled environment. A new indicator is now proposed, based on the uncertainty of the demand, the flexibility of the supply chains, the evolution of the products lifecycle and the fulfillment of a required service level. The model to support the indicator will be developed within the real options approach.overstock, stock management, real options

Managing the trade-off implications of global supply

The cost versus response trade-off is a growing logistics issue due to many markets being increasingly characterized by demand uncertainty and shorter product life cycles. This is exacerbated further with supply increasingly moving to low cost global sources. However, the poor response implications of global supply are often not addressed or even acknowledged when undertaking such decisions. Consequently, various practical approaches to minimising, postponing or otherwise managing the impact of the demand uncertainty are often only adopted retrospectively. Even though such generic solutions are documented through case examples we lack effective tools and concepts to support the proactive identification and resolution of such trade-offs. This paper reports on case-based theory building research, involving three cases from the UK and USA used in developing a conceptual model with associated tools, in support of such a process

Overview and classification of coordination contracts within forward and reverse supply chains

Among coordination mechanisms, contracts are valuable tools used in both theory and practice to coordinate various supply chains. The focus of this paper is to present an overview of contracts and a classification of coordination contracts and contracting literature in the form of classification schemes. The two criteria used for contract classification, as resulted from contracting literature, are transfer payment contractual incentives and inventory risk sharing. The overview classification of the existing literature has as criteria the level of detail used in designing the coordination models with applicability on the forward and reverse supply chains.Coordination contracts; forward supply chain; reverse supply chain

Inventory drivers in a pharmaceutical supply chain

In recent years, inventory reduction has been a key objective of pharmaceutical companies, especially within cost optimization initiatives. Pharmaceutical supply chains are characterized by volatile and unpredictable demands –especially in emergent markets-, high service levels, and complex, perishable finished-good portfolios, which makes keeping reasonable amounts of stock a true challenge. However, a one-way strategy towards zero-inventory is in reality inapplicable, due to the strategic nature and importance of the products being commercialised. Therefore, pharmaceutical supply chains are in need of new inventory strategies in order to remain competitive. Finished-goods inventory management in the pharmaceutical industry is closely related to the manufacturing systems and supply chain configurations that companies adopt. The factors considered in inventory management policies, however, do not always cover the full supply chain spectrum in which companies operate. This paper works under the pre-assumption that, in fact, there is a complex relationship between the inventory configurations that companies adopt and the factors behind them. The intention of this paper is to understand the factors driving high finished-goods inventory levels in pharmaceutical supply chains and assist supply chain managers in determining which of them can be influenced in order to reduce inventories to an optimal degree. Reasons for reducing inventory levels are found in high inventory holding and scrap related costs; in addition to lost sales for not being able to serve the customers with the adequate shelf life requirements. The thesis conducts a single case study research in a multi-national pharmaceutical company, which is used to examine typical inventory configurations and the factors affecting these configurations. This paper presents a framework that can assist supply chain managers in determining the most important inventory drivers in pharmaceutical supply chains. The findings in this study suggest that while external and downstream supply chain factors are recognized as being critical to pursue inventory optimization initiatives, pharmaceutical companies are oriented towards optimizing production processes and meeting regulatory requirements while still complying with high service levels, being internal factors the ones prevailing when making inventory management decisions. Furthermore, this paper investigates, through predictive modelling techniques, how various intrinsic and extrinsic factors influence the inventory configurations of the case study company. The study shows that inventory configurations are relatively unstable over time, especially in configurations that present high safety stock levels; and that production features and product characteristics are important explanatory factors behind high inventory levels. Regulatory requirements also play an important role in explaining the high strategic inventory levels that pharmaceutical companies hold

End-of-Life Inventory Problem with Phase-out Returns

We consider the service parts end-of-life inventory problem of a capital goods manufacturer in the final phase of its life cycle. The final phase starts as soon as the production of parts terminates and continues until the last service contract expires. Final order quantities are considered a popular tactic to sustain service fulfillment obligations and to mitigate the effect of obsolescence. In addition to the final order quantity, other sources to obtain serviceable parts are repairing returned defective items and retrieving parts from phase-out returns. Phase-out returns happen when a customer replaces an old system platform with a next generation one and returns the old product to the original equipment manufacturer (OEM). These returns can well serve the demand for service parts of other customers still using the old generation of the product. In this paper, we study the decision-making complications stemming from phase-out occurrence. We use a finite horizon Markov decision process to characterize the structure of the optimal inventory control policy. We show that the optimal policy consists of a time varying threshold level for item repair. Furthermore, we study the value of phase-out information by extending the results to cases with an uncertain phase-out quantity or an uncertain schedule. Numerical analysis sheds light on the advantages of the optimal policy compared to some heuristic policies.spare parts;end-of-life inventory management;phase-out returns