Sethi / Yan / Zhang Inventory and Supply Chain Management with Forecast Updates

2005
ISBN: 978-0-387-25663-4
Verlag: Springer US
Format: PDF
Kopierschutz: Wasserzeichen (»Systemvoraussetzungen)

E-Book, Englisch, Band 81, 292 Seiten, eBook

Reihe: International Series in Operations Research Management Science

Inventory and Supply Chain Management with Forecast Updates is concerned with the problems of inventory and supply chain decision making with information updating over time. The models considered include inventory decisions with multiple sources and delivery modes, supply-contract design and evaluation, contracts with exercise price, volume-flexible contracts allowing for spot-market purchase decisions, and competitive supply chains. Real problems are formulated into tractable mathematical models, which allow for an analysis of various approaches, and provide insights for better supply chain management. The book provides a unified treatment of these models, presents a critique of the existing results, and points out potential research directions. Attention is focused on solutions – that is, inventory decisions prior and subsequent to information updates and the impact of the quality of information on these decisions.

Zielgruppe

Research

Autoren/Hrsg.

Sethi, Suresh P.

Yan, Houmin

Zhang, Hanqin

Inhaltsverzeichnis

Inventory and Supply Chain Models with Forecast Updates.- Examples from Industry.- Inventory Models with Two Consecutive Delivery Modes.- Inventory Models with Two Consecutive Delivery Modes and Fixed Cost.- Inventory Models with Three Consecutive Delivery Modes.- Multiperiod Quantity-Flexibility Contracts.- Purchase Contract Management: Fixed Exercise Cost.- Purchase Contract Management: Two-Player Games.

Leseproben

2.2. Industry Observations (p. 24-25)
A major security-system manufacturing company produces and distributes security systems for military, residential, commercial, and industrial applications. It has a design center in California, a manufacturing center in Asia, and three regional distribution centers in San Francisco, Amsterdam, and Singapore. The company sources components and subassemblies around the world. The management objectives are to improve the response time to meet market demand, to reduce inventory, and to shorten lead time (including the time for manufacturing and distribution). In the security-system market, customers expect to have the required device or system within one month. Therefore, given long lead times in procurement and production, the manufacturing operation relies largely on forecasts.

From a practical point of view, forecasts are never accurate, and the company updates its demand forecasts until the real demand is realized. When too little raw material is ordered, the company has to pay a higher price to secure them or use air shipment to expedite them (if these options are feasible). When too many raw materials and subassemblies are ordered, the company has to keep them in inventory. These materials often become obsolete. These updates in forecasting also make it difficult for the company to allocate its production capacity efficiently.

A key component in security systems is the microcontroller, which makes up 30% to 40% of the total materials cost. A microcontroller is a central processing unit (CPU) chip with a built-in memory and interface circuits. The read-only memory (ROM) contains permanent data (program code). See Spasov [5] for a discussion of related concepts about microcontrollers and their technology. The company can order microcontrollers with user-supplied data requirements. If user-supplied data is provided, the semiconductor manufacturing includes a process known as custom photo masking in the wafer-fabrication process. Alternatively, the company can purchase microcontrollers with a programmable ROM such as one-time-programmable (OTP) read-only memory or erasable programmable read-only memory (EPROM). The company inputs the data into these programmable microcontrollers after the chips are received. To order custom-masked chips, the users are required to provide the data (program code) prior to manufacturing, and a significant lead time is required. On the other hand, since programmable ROMs are generic, these microcontrollers can be produced with a considerably shorter lead time. However, the OTP chips are about twice as expensive as custom-masked chips and EPROM chips are even more expensive. The company must decide how to order both custom-masked and OTP chips.

The company uses a half-year rolling window for demand forecasting. These forecasts are made and updated monthly by the regional offices. The headquarter coordinates the forecasts and passes them to its logistics and manufacturing functions. Procurement decisions are made based on the demand forecast and the lead time required by its vendors. The company divides the raw materials into two classes: critical and regular. The components that have fewer sources, and have a higher value content, and require a longer lead time are classified into their critical materials. Microcontrollers are a typical example.