Chopra2ndEditionChapter10.ppt.ppt
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1、10-1,Chapter 10 Managing Economies of Scale in the Supply Chain: Cycle Inventory,Supply Chain Management (3rd Edition),10-2,Outline,Role of Cycle Inventory in a Supply Chain Economies of Scale to Exploit Fixed Costs Economies of Scale to Exploit Quantity Discounts Short-Term Discounting: Trade Promo
2、tions Managing Multi-Echelon Cycle Inventory Estimating Cycle Inventory-Related Costs in Practice,10-3,Role of Inventory in the Supply Chain,Cost,Availability,Efficiency,Responsiveness,10-4,Role of Cycle Inventory in a Supply Chain,Lot, or batch size: quantity that a supply chain stage either produc
3、es or orders at a given time Cycle inventory: average inventory that builds up in the supply chain because a supply chain stage either produces or purchases in lots that are larger than those demanded by the customer Q = lot or batch size of an order D = demand per unit time Cycle inventory = Q/2 (d
4、epends directly on lot size) Average flow time = Avg inventory / Avg flow rate Average flow time from cycle inventory = Q/(2D),10-5,An Inventory System,D,D,Average Inv. Level,10-6,Role of Cycle Inventory in a Supply Chain,Q = 1000 units D = 100 units/day Cycle inventory = Q/2 = 1000/2 = 500 = Avg in
5、ventory level from cycle inventory Avg flow time = Q/2D = 1000/(2)(100) = 5 days Cycle inventory adds 5 days to the time a unit spends in the supply chain Lower cycle inventory is better because: Average flow time is lower Working capital requirements are lower Lower inventory holding costs,10-7,Rol
6、e of Cycle Inventory in a Supply Chain,Cycle inventory is held primarily to take advantage of economies of scale in the supply chain Supply chain costs influenced by lot size: Material cost = C Fixed ordering cost = S Holding cost = H = hC (h = cost of holding $1 in inventory for one year) Primary r
7、ole of cycle inventory is to allow different stages to purchase product in lot sizes that minimize the sum of material, ordering, and holding costs Ideally, cycle inventory decisions should consider costs across the entire supply chain, but in practice, each stage generally makes its own supply chai
8、n decisions increases total cycle inventory and total costs in the supply chain,10-8,Economies of Scale to Exploit Fixed Costs,How do you decide whether to go shopping at a convenience store or at Sams Club? Lot sizing for a single product (EOQ) Aggregating multiple products in a single order Lot si
9、zing with multiple products or customers Lots are ordered and delivered independently for each product Lots are ordered and delivered jointly for all products Lots are ordered and delivered jointly for a subset of products,10-9,Economies of Scale to Exploit Fixed Costs,Annual demand = D Number of or
10、ders per year = D/Q Annual material cost = CD Annual order cost = (D/Q)S Annual holding cost = (Q/2)H = (Q/2)hC Total annual cost = TC = CD + (D/Q)S + (Q/2)hC Figure 10.2 shows variation in different costs for different lot sizes,10-10,Fixed Costs: Optimal Lot Size and Reorder Interval (EOQ),D: Annu
11、al demand S: Setup or Order Cost C: Cost per unit h: Holding cost per year as a fraction of product cost H: Holding cost per unit per year Q: Lot Size T: Reorder interval Material cost is constant and therefore is not considered in this model,10-11,Example 10.1,Demand, D = 12,000 computers per year
12、d = 1000 computers/month Unit cost, C = $500 Holding cost fraction, h = 0.2 Fixed cost, S = $4,000/order Q* = Sqrt(2)(12000)(4000)/(0.2)(500) = 980 computers Cycle inventory = Q/2 = 490 Flow time = Q/2d = 980/(2)(1000) = 0.49 month Reorder interval, T = 0.98 month,10-12,Example 10.1 (continued),Annu
13、al ordering and holding cost = = (12000/980)(4000) + (980/2)(0.2)(500) = $97,980 Suppose lot size is reduced to Q=200, which would reduce flow time: Annual ordering and holding cost = = (12000/200)(4000) + (200/2)(0.2)(500) = $250,000 To make it economically feasible to reduce lot size, the fixed co
14、st associated with each lot would have to be reduced,10-13,Example 10.2,If desired lot size = Q* = 200 units, what would S have to be? D = 12000 units C = $500 h = 0.2 Use EOQ equation and solve for S: S = hC(Q*)2/2D = (0.2)(500)(200)2/(2)(12000) = $166.67 To reduce optimal lot size by a factor of k
15、, the fixed order cost must be reduced by a factor of k2,10-14,Key Points from EOQ Model,In deciding the optimal lot size, the tradeoff is between setup (order) cost and holding cost. If demand increases by a factor of 4, it is optimal to increase batch size by a factor of 2 and produce (order) twic
16、e as often. Flow time should decrease as demand increases. If lot size is to be reduced, one has to reduce fixed order cost. To reduce lot size by a factor of 2, order cost has to be reduced by a factor of 4.,10-15,Aggregating Multiple Products in a Single Order,Transportation is a significant contr
17、ibutor to the fixed cost per order Can possibly combine shipments of different products from the same supplier same overall fixed cost shared over more than one product effective fixed cost is reduced for each product lot size for each product can be reduced Can also have a single delivery coming fr
18、om multiple suppliers or a single truck delivering to multiple retailers Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailer
19、s, or suppliers,10-16,Example: Aggregating Multiple Products in a Single Order,Suppose there are 4 computer products in the previous example: Deskpro, Litepro, Medpro, and Heavpro Assume demand for each is 1000 units per month If each product is ordered separately: Q* = 980 units for each product To
20、tal cycle inventory = 4(Q/2) = (4)(980)/2 = 1960 units Aggregate orders of all four products: Combined Q* = 1960 units For each product: Q* = 1960/4 = 490 Cycle inventory for each product is reduced to 490/2 = 245 Total cycle inventory = 1960/2 = 980 units Average flow time, inventory holding costs
21、will be reduced,10-17,Lot Sizing with Multiple Products or Customers,In practice, the fixed ordering cost is dependent at least in part on the variety associated with an order of multiple models A portion of the cost is related to transportation (independent of variety) A portion of the cost is rela
22、ted to loading and receiving (not independent of variety) Three scenarios: Lots are ordered and delivered independently for each product Lots are ordered and delivered jointly for all three models Lots are ordered and delivered jointly for a selected subset of models,10-18,Lot Sizing with Multiple P
23、roducts,Demand per year DL = 12,000; DM = 1,200; DH = 120 Common transportation cost, S = $4,000 Product specific order cost sL = $1,000; sM = $1,000; sH = $1,000 Holding cost, h = 0.2 Unit cost CL = $500; CM = $500; CH = $500,10-19,Delivery Options,No Aggregation: Each product ordered separately Co
24、mplete Aggregation: All products delivered on each truck Tailored Aggregation: Selected subsets of products on each truck,10-20,No Aggregation: Order Each Product Independently,Total cost = $155,140,10-21,Complete Aggregation: Order All Products Jointly,S* = S + sL + sM + sH = 4000+1000+1000+1000 =
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