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Aemn328 logistics and transportation part04

Lead Time

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Aemn328 logistics and transportation part04

  1. 1. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org AEMN328 Logistics and Transportation Logistics and Transportation (Supply Chain Management) Inventory Reorder Point Inventory Reorder Point Mohammad Tawfik
  2. 2. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Re-order Point
  3. 3. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Supplier Lead-time ● Supplier delivers the product a fixed time after the order is placed ● This is called the lead-time (L) ● If lead-time (L) is fixed we can anticipate the delay and order earlier ● “Order when the amount of inventory on-hand is D*L” ● This is called the Re-Order Point (ROP)
  4. 4. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org
  5. 5. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org For all that … Demand was assumed to be determinant (certain) … What if the demand fluctuates? What if the demand fluctuates?
  6. 6. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org
  7. 7. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org How much safety stock should we have? How much safety stock should we have?
  8. 8. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Probability! ● What is the probability of …? – Coin Flip – Dice throw – Distance thrown!!! ● What is the probability distribution? ● What is Normal probability distribution?
  9. 9. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Source: Wikipedia https://en.wikipedia.org/wiki/Normal_distribution
  10. 10. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Source: Wikipedia https://en.wikipedia.org/wiki/Normal_distribution
  11. 11. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org What is Standard Deviation? ● It is a measure of how far from average your actual point may be! ● The more the standard deviation the less certain your are in your expectations!!!
  12. 12. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org What is the probability that ... ● You get the average or less? 50% ● You get less than the (average + standard deviation)? 84% ● You get the value of Z or less more than the average? P(x<=Aver. + Z) = normsdist(Z)
  13. 13. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Now, comes the important question ● What is the value of Z, such that the probability P(x<=Z*Standard Deviation)>=Service level? ● Z=normsinv(service level)
  14. 14. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org What is the service level? ● It is the probability that you will be able to cover ALL ALL requests during a certain period of time.
  15. 15. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org How to calculate safety stock? 1 Get average and standard deviation 2 Select service level 3 Evaluate the Z-value corresponding to your service level 4 Safety Stock = Z-value * Standard Deviation
  16. 16. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Example ● Zeco consumes an average of 10kg of sugar everyday ● The standard deviation of consumption is 2kg. ● How much safety stock should he keep in the cafe to have a service level of 90%, 95%, and 99%?
  17. 17. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Solution ● For the service levels: – 90% ==> Z=1.28 ==> Safety Stock = 2.56 ~ 3Kg – 95% ==> Z=1.64 ==> Safety Stock = 3.29 ~ 4Kg – 99% ==> Z=2.33 ==> Safety Stock = 4.65 ~ 5Kg
  18. 18. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org What if the lead time is not certain?
  19. 19. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Uncertain Lead Time ● If the lead time has an average of L and a standard deviation of SL ● And, the demand has an average of D and a standard deviation of SD ● Then the standard deviation value used for calculation of the safety stock should be: S=sqrt((L * SD^2) + (D^2 * SL^2))
  20. 20. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Measuring Performance
  21. 21. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org
  22. 22. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org
  23. 23. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Assignment #4 Assignment #4
  24. 24. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org Al-Yomn Steel ● What is the average weekly demand? ● If the supply lead-time is one week, what should the Reorder Point be? ● If the supplies are delivered on a lead time of a weekly basis, what should the Reorder Point be to achieve a service level of 95%? ● If the lead time standard deviation is 2 days, what should the safety stock be to achieve 95% service level? ● Download the data spreadsheet from this link
  25. 25. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References References
  26. 26. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References ● Supply Chain Logistics, Rudolf Leuschner, Ph.D. https://www.coursera.org/learn/supply-chain-logistics?specialization=supply- chain-management ● Supply Chain Operations, Rudolf Leuschner, Ph.D. https://www.coursera.org/learn/operations?specialization=supply-chain-man agement ● Supply Chain Planning, Rudolf Leuschner, Ph.D. https://www.coursera.org/learn/planning?specialization=supply-chain-manag ement ● Supply Chain Sourcing, Rudolf Leuschner, Ph.D. https://www.coursera.org/learn/sourcing?specialization=supply-chain-manag ement
  27. 27. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References ● Supply Chain Management Strategy, Rudolf Leuschner, Ph.D. https://www.coursera.org/learn/supply-chain-management-strategy ● Operations Management: Analysis and Improvement Methods, Udatta Palekar, PhD https://www.coursera.org/learn/operations-management?specializatio n=value-chain-management ● Operations Management: Strategy and Quality Management for the Digital Age, Udatta Palekar, PhD https://www.coursera.org/learn/process-improvement?specialization= value-chain-management
  28. 28. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References ● “What does a Supply Chain Engineer do?”, StepStone, https://www.stepstone.be/career-advice/article/supply-chain-engineer/ ● “Supply Chain Engineer job description template”, Hiring Resources, https://recruitee.com/hiring-resources/job-description-templates/supply-chain-e ngineer/ ● “What is supply chain management (SCM)?”, TechTarget® https://searcherp.techtarget.com/definition/supply-chain-management-SCM ● “Supply chain management”, WikiPedia, https://en.wikipedia.org/wiki/Supply_chain_management ● “The three flows of supply chain”, Nifemi Aluko, https://kpakpakpa.com/spotlight/the-three-flows-of-supply-chain/
  29. 29. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References ● “Consumer Behaviour, Brand Management, Marketing and Psychology”, Brandalyzer, https://brandalyzer.blog/2016/03/23/the-five-major-flows-in-supply-chain/ ● “Top 3 Strategies To Improve The Supply Chain Performance In Your Business”, Darren Woolard, https://www.dmg-freight.com/top-3-strategies-to-improve-supply-chain-performance -in-business/ ● “5 Ways to Increase Supply Chain Performance”, Zoe Meeken, https://www.business.org/software/supplier/ways-to-increase-supply-chain-perform ance/ ● “7 Tips for Effective Inventory Management in Global Supply Chain”, TradeGecko, https://www.tradegecko.com/blog/7-tips-for-effective-inventory-management-in-a-gl obal-supply-chain
  30. 30. Supply Chain Management Mohammad Tawfik #AcademyOfKnowledge http://SCM.AcademyOfKnowledge.org References ● “Supply Chain Management: Inventory Management”, Donglei Du ● “Business-Plan Forecasting”, Steven D. Peterson, Peter E. Jaret, Barbara Findlay Schenck ● “Excel Sales Forecasting For Dummies”, Conrad Carlberg ● “Sales Forecasting: A Practical Guide”, Mark Blessington ● “Sales and Operations Planning The How-To Handbook”, Thomas F. Wallace and Robert A Stahl ● “Introduction to Financial Forecasting in Investment Analysis”, John Guerard

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