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Agenda
Introduction
Trends of Entities
Cost Summary
Our Strategy
Observations
Players
Retailer, Wholesaler, Distributor and Manufacturer. Minimize system-wide (chain) long-run average cost.
Goal
2 weeks for the factory 4 weeks for other supply chain players
Retailers Trend
The order placed follows the customers order 1-1 policy followed initially -order whatever amount is ordered from your customer. Towards the end the strategy was to keep the current inventory minimum(17-22 week) Zero level inventory(22-30 week) No backorders observed Total cost = 0.5*254+ 0 =127
Wholesalers Trend
1-1 policy followed -order whatever amount is ordered from your retailer No backorders observed Reduction in the levels of inventory(21-30 week) Total cost = 0.5*322+0 =161
Distributors Trend
1-1 policy followed -order whatever amount is ordered from your wholesaler No backorders observed Total cost = 0.5*340+0 =170
Factorys Trend
1-1 policy followed -order whatever amount is ordered from your distributor No backorders observed Total cost = 0.5*356+0 = 178
Cost Summary
Cost Calculation Enitity Retailer Wholesaler Distributor Total Inventory 254 322 340 Total Backlog 0 0 0 Total Cost 127 161 170
356
178 636
Our Strategy
Initially, retailer followed a 1:1 strategy. When the demand changed for second time, Retailer decided to minimize his inventory thus reduction in costs for retailer.
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Observations
Presence of buffer stock helped in reduction of inventory costs in cases of demand volatility
No backlogs observed
No Bullwhip effect was observed as 1-1 policy was followed Rational behavior of intermediaries helped minimize information distortion
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High demand uncertainty and variability Players individual perception and mistrust Each player tried to minimize his inventory without considering the other intermediaries Resulted in backlogs Failure to foresee that orders once placed would come back after 4 weeks
Information distortion
Q&A
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