determining optimal level of product availability optimal matching of supply and demand (iii)...

Determining Optimal Level of Product Availability

Determining Optimal Level of Product Availability

Optimal Matching of Supply and Demand (III)

Optimal Matching of Supply and Demand (III)

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「姓名標示－非商業性－相同方式分享」台灣3.0

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第十單元： Determining Optimal Level of Product Availability

1

蔣明晃教授

http://get.nccu.edu.tw:8080/getcdb/handle/getcdb/127023


http://office.microsoft.com/zh-hk/HA010152965.aspx




Pull Postponement:EX.2Pull Postponement:EX.2

WikipediaFlickr_kennethkonica

2


http://en.wikipedia.org/wiki/Public_domain

Pull PostponementPull Postponement

► Basic Elements:

》The process steps must be sequenced so that the less differentiating steps are performed at prior to the decoupling point.

》After the decoupling point, the process steps can be performed flexible and fast.

》Accurate order capture for BTO.

Example: National Bicycle, Benetton.

3

延遲差異化延遲差異化► 延遲差異化 (Postponement Differentiation) 之意義

》此種延遲主要是運用在最終產品的需求未確定時，先生產一些通用或產品族共通的部分，等到特定的產品需求確定後再進行生產或製造，以減少不確定性。

4

延遲差異化的做法延遲差異化的做法

►作業程序的重排序 (Resequencing)

》例子 : US disk drive manufacturing. Insert generic circuit board into assembly, complete much of the testing, remove the generic circuit board, and add customer-specific boards later.

》例子 : Benetton, postpone dyeing until after assembled. Cost: 10% more expensive, new machine purchased and employee retrained.

5


►產品的共通性 (Commonality)

》例子 : Printer manufacturing, redesign the new and old products to share a common circuit board and printhead such that final process can be delayed.

》利用產品線或產品族的重新設計來達成

本作品轉載自 hp (http://h10010.www1.hp.com/wwpc/au/en/sm/WF06c/A1-12771-64209-64548-64548-26997-14820.html)，依據著作權法第 46 、 52 、 65條合理使用。

6



http://creativecommons.org/licenses/by-sa/2.0/


►模組化 (Modularity) ：》模組化產品設計：將功能採模組化，使各個模組能夠簡易且以較低成本的添加到產品上。例子： HP Laser Jet

》模組化製程設計：製程應設計盡量獨立的生產模組，容易因應不同的要求進行彈性的調整。例子： print-and- pigment mixture, Levis jeans

本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46 、 52 、 65條合理使用。

本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、52 、 65條合理使用。

本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、 52 、 65條合理使用。7

http://dir.coolclips.com/Food/Vegetables/Vegetable_groups/bamboo,_woodcut_style_vc001509.html


http://www.benettongroup.com/


http://creativecommons.org/licenses/by-nc-sa/3.0/us/


延遲差異化的做法延遲差異化的做法►標準化 (Standardization):

》建立數種顧客所需的標準化產品之選擇 .

►機動敏捷的供應網路 (Agile Supply Networks)

》某些網路節點存放基本的產品 , 並在收到顧客訂單時進行客製化的最後作業 .

8

Concurrent and Parallel Processing

Concurrent and Parallel Processing

► Concurrent and parallel processing involves modifying the manufacturing process so that steps that were previously performed in a sequence can be completed at the same time.

► A key is the concept of modularity or decoupling

》 reduce lead time》 reduce inventory cost

9

延遲差異化施行的考量延遲差異化施行的考量

►重新排序或延遲時所需資本投入之考量。►重新排序或延遲時所需技術與能力之考量。►延遲的結果可能使存貨成本提高。►在國際運籌作業中，各進出口國對原物料，零組件或在製品的關稅考量。

10

WIKIPEDIA

Logistics Postponement

Logistics Postponement

► Meaning:

》 Redesign the tasks in the SC so that some of the customization steps can be performed downstream closer to the customers.

本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第46 、 52 、 65條合理使用。

本作品轉載自 CoolCLIPS網站 (http://dir.coolclips.com/Food/Vegetables/Vegetable_groups/bamboo,_woodcut_style_vc001509.html), Free 150 pixel Jpeg Image，瀏覽日期 2012/03/16。按著作權法第 52 、 65條合理使用。

11









Requirements for logistics postponement

Requirements for logistics postponement

► can not lead to quality degradation.

► downstream sites have capability to perform the task without excessive cost and time.

► potentially to procure the necessary components or modules for the customization.

► the engineering team is able and willing to design products and processes to defer the steps effectively.

12

Form PostponementForm Postponement

► Meaning:

》postponement is achieved through the change in the form of the product structure by standardizing some of the process steps or components.

► Example: HP Laser Printer.

本作品轉載自 hp (http://h10010.www1.hp.com/wwpc/au/en/sm/WF06c/A1-12771-64209-64548-64548-26997-14820.html)，依據著作權法第 46 、 52 、 65條合理使用。

13




► Products or processes should be modular in structure.

► Design engineer should be aware of the importance of SCM to pursuit design for postponement opportunity.

► Must involve multiple functions or organization in collaboration.

► Quantify the costs and benefits to determine the best point for postponement

Postponement Enablers

Postponement Enablers

14

The Value of PostponementThe Value of

Postponement

► Improve matching of supply and demand: need to qualify the benefit with additional cost

► Increase profitability: differentiate after receiving customer order so that inventories can be reduced

► Valuable for selling a large variety of products with demand that is independent and comparable in size

15

Value of Postponement: Benetton


◈ For each color

》Mean demand = 1,000; SD = 500

◈ For each garment

》Sale price = $50

》Salvage value = $10

》Production cost using option 1 (thread are dyed and the garment was knitted) with long lead time = $20

》Production cost using option 2 (dying was postponed until after the garment was knitted) = $22

► What is the value of postponement?

本作品轉載自 Benetton Group (http://www.benettongroup.com/)，依據著作權法第 46 、 52 、 65條合理使用。

16


http://ocw.aca.ntu.edu.tw/ntu-ocw/index.php/ocw/copyright_declaration



► Option 1:

》CSL* = (p - c) /(p - s) = 30/40 = 0.75

》O* = NORMINV(0.75, 1000, 500) = 1,337 units of each color

》Expected profits from each color = $23,644

》Expected overstock for each color = 412

》Expected understock for each color = 75

》5348 sweaters are produced, expected profit of $94,576 with an average of 1,648 sweaters sold on clearance and 300 customers turns away for lack of sweaters

1,337X4=5348

23,644X4=94,576


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Value of Postponement: BenettonValue of Postponement: Benetton

► Option 2: c = $22 instead of $20

》CSL* = (p - c) /(p - s) = 28/40 = 0.70

》 .

》Expected profits = $98,092

》Expected overstock for each color = 715

》Expected understock for each color = 190

► Expected profit increases from $94,576 to $98,092

► Expected overstock declines from 1,648 to 715

► Expected understock declines from 300 to 190

4O*A = NORMINV(0.70, 1000 x 4, 500 x ) = 4,524 units


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Value of Postponement with Dominant ProductValue of Postponement with Dominant Product

► Color with dominant demand (red): Mean = 3,100, SD = 800

► Other three colors: Mean = 300, SD = 200

► Option 1:

》CSL* = 0.75

》Optimal production of red sweaters O* = NORMINV(0.75, 3100, 800) = 3,640; expected profit = $82,831, expected overstock = 659, expected understock = 119

》Optimal production of each other color sweater = 435; expected profit = $6,458, expected overstock = 165, expected understock = 30

》Total production = 4,945, expected profit = $102,205, expected overstock = 1,154, expected understock = 209

3640+4,35X3=4,945 $82,831 + $6,458 =4,945

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Value of Postponement with Dominant Product

Value of Postponement with Dominant Product

8723200800 22

► Option 2:

》A = 3100 + 3300 = 4,000; A =

》Total production = 4,457; expected profit = $99,872,

expected overstock = 623, expected understock = 166

► Expected profit without postponement = $102,205

► Expected profit with postponement = $99,872

20

Meaning of Pure Postponement

Meaning of Pure Postponement

► Postponement may reduce overall profit for a firm if a single product contributes the majority of the demand, since the increased manufacturing expense due to postponement outweighs the small benefit from aggregation

21


Tailored Postponement: Benetton


► On the portion of the certain demand, postponement provides little value, thus, company needs to use lower cost method.

► On the portion of the uncertain demand, postponement significantly improves forecast accuracy, thus, company is willing to incur higher cost to achieve the benefit.

► Produce Q1 units for each color using Option 1 and QA units (aggregate) using Option 2

22





Manufacturing PolicyManufacturing Policy AverageAverage

ProfitProfit

AverageAverage

OverstockOverstock

AverageAverage

UnderstockUnderstockQQ11 QQAA

00 45244524 $97847$97847 510510 210210

13371337 00 $94377$94377 13691369 282282

700700 18501850 $102730$102730 308308 168168

800800 15501550 $104603$104603 427427 170170

900900 950950 $101326$101326 607607 266266

900900 10501050 $101647$101647 664664 230230

10001000 850850 $100312$100312 815815 195195

10001000 950950 $100951$100951 803803 149149

11001100 550550 $99180$99180 10261026 211211

11001100 650650 $100510$100510 10081008 18518523

The Benefit of Tailored Postponement

The Benefit of Tailored Postponement

► Tailored postponement allows a firm to increase its profitability by postponing only the uncertain part of the demand and producing the predictable part at a lower cost without postponement

24

The Meaning of Tailored Sourcing

The Meaning of Tailored Sourcing

► A combination of two supply sources: one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty but a higher cost

► A backup policy

► Disadvantage: increasing complexity of implementation

25

Tailored SourcingTailored Sourcing

► Sourcing alternatives

》Low cost, long lead time supplier

►Cost = $245, Lead time = 9 weeks

》High cost, short lead time supplier

►Cost = $250, Lead time = 1 week

26

Tailored Sourcing Strategies

Tailored Sourcing Strategies

Fraction of demand from Fraction of demand from overseas supplieroverseas supplier Annual ProfitAnnual Profit

0%0% $37,250$37,250

50%50% $51,613$51,613

60%60% $53,027$53,027

100%100% $48,875$48,875

27

Tailored Sourcing: Multiple Sourcing Sites

Tailored Sourcing: Multiple Sourcing Sites

CharacteristicCharacteristic Primary SitePrimary Site Secondary SiteSecondary Site

Manufacturing CostManufacturing Cost HighHigh LowLow

Flexibility Flexibility (Volume/Mix)(Volume/Mix) HighHigh LowLow

ResponsivenessResponsiveness HighHigh LowLow

Engineering SupportEngineering Support HighHigh LowLow

28


Dual Sourcing Strategies

Dual Sourcing Strategies

StrategyStrategy Primary Site Primary Site Secondary Site Secondary Site

Volume based dual Volume based dual sourcing (Benetton)sourcing (Benetton) FluctuationFluctuation Stable demandStable demand

Product based dual Product based dual sourcing(Levi sourcing(Levi

Strauss)Strauss)

Unpredictable Unpredictable products, Small products, Small

batchbatch

Predictable, large Predictable, large batch productsbatch products

Model based dual Model based dual sourcingsourcing Newer productsNewer products Older stable Older stable

productsproducts

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Contracts for Product Availability and Supply Chain

Profits


Profits► Many shortcomings in supply chain performance occur because

the buyer and supplier are separate organizations and each tries to optimize its own profit

► Total supply chain profits might therefore be lower than if the supply chain coordinated actions to have a common objective of maximizing total supply chain profits

► Double marginalization results in suboptimal order quantity

► An approach to dealing with this problem is to design a contract that encourages a buyer to purchase more and increase the level of product availability

► The supplier must share in some of the buyer’s demand uncertainty

本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、 52 、 65條合理使用。

30




Profits








Impact of Supply Chain Contracts on Profitability: Buyback

Contracts

Impact of Supply Chain Contracts on Profitability: Buyback

Contracts》 Buybacks by publishers

》 Tech Fiber produces jacket at v = $10 and charges a wholesale price of c = $100. Ski Adventure sells jacket for p = $200. Demand is normal distributed with =1,000 and =300. Unsold jackets have no salvage value.

► Should TF be willing to buy back unsold jackets? Why?

》 CSLSA = 0.5, SA orders 1,000, expected profit = $76,063;

TF sells 1,000 for a total profit of $90,000. Total expected

SC profit = $166,063


31




Profits









32



The Categories of Supply Contract


► Horizon Length► Pricing: linear (proportional) or non-linear (two-part

tariff); buyback, holding cost subsidies, payment for inability to supply

► Periodicity of ordering: fixed or random► Quantity commitment:

》Total minimum commitment: quantity or dollar value》Periodical commitment》Demand commitment》Capacity commitment

33



► Flexibility:

》Magnitude or frequency of adjustments

► Delivery commitment:

》Lead time

》Shipment policy

► Quality: defect rates, specifications

► Information sharing

34

Supplier Selection and ContractsSupplier Selection and Contracts

► Contracts for Product Availability and Supply Chain Profits

》Buyback Contracts

》Revenue-Sharing Contracts

》Quantity Flexibility Contracts

► Contracts to Coordinate Supply Chain Costs

► Contracts to Increase Agent Effort

► Contracts to Induce Performance Improvement

35









》 Buybacks by publishers

》 Tech Fiber produces jacket at v = $10 and charges a wholesale price of c = $100. Ski Adventure sells jacket for p = $200. Demand is normal distributed with =1,000 and =300. Unsold jackets have no salvage value.

► Should TF be willing to buy back unsold jackets? Why?

》 CSLSA = 0.5, SA orders 1,000, expected profit = $76,063;

TF sells 1,000 for a total profit of $90,000. Total expected

SC profit = $166,063

Impact of Supply Chain Contracts on Profitability:

Buyback Contracts


Buyback Contracts


36


http://www.flickr.com/photos/littlebiglens/6878901153/sizes/l/in/pool-60201846@N00/










Buyback Contracts


Buyback Contracts》For entire SC, SC makes $190 for each jacket sold, and only loses $10. Thus, the cost of understocking is $190, and the cost of overstock is $10.》The optimal CSL for entire SC is 0.95 and produce 1,493 jackets. Total SC profit is $183,812.


37

http://en.wikipedia.org/wiki/File:McDonald's_Golden_Arches.svg


Return Policy : Buyback contracts

Return Policy : Buyback contracts

► Issue of Double Marginalization

► Wholesale price c

► Buyback price b

► Manufacturing salvage value $sM

► The salvage value for retailer is s=b

► Optimal order quantity O*

► Expected manufacturing profit

= O*(c-v) – b expected overstock at retailer= O*(c-v) – b expected overstock at retailer

v ：生產一單位的變動成本

38

Buyback ContractsBuyback Contracts

WholesalWholesale Price ce Price c

Buy-Buy-back back price bprice b

Optimal Optimal

Order Order Size for Size for SASA

Expected Expected

Profit for Profit for

SASA

Expected Expected

Returns Returns to TFto TF

Expected Expected

Profit for Profit for

TFTF

ExpectedExpected

Supply Supply

Chain Chain ProfitProfit

$100$100 $0$0 10001000 7606376063 120120 9000090000 166063166063

100100 3030 10671067 8015480154 156156 9133891338 171492171492

100100 6060 11701170 8572485724 223223 9188691886 177610177610

110110 00 962962 6625266252 102102 9623096230 162482162482

110110 7878 11911191 7807478074 239239 100480100480 178555178555

110110 105105 14861486 8693886938 493493 9687296872 183810183810

120120 00 924924 5681956819 8080 101640101640 158459158459

120120 9696 12211221 7050870508 261261 109225109225 179733179733

120120 116116 15011501 7750077500 506506 106310106310 183810183810

39

Buyback ContractsBuyback Contracts

► Manufactures can use buyback contracts to increase their own profit as well as total supply chain profits. Buyback contract also encourage retailers increase product availability

► Manufactures need to consider the cost associated with a return

► As the cost associated with a return increases, buyback contracts become less attractive.

► Applications: (1) bookstores return the cover of the book to reduce the cost of return; (2) manufactures use holding cost subsidies.


本作品轉載自 Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、 52 、 65條合理使用。40



http://h10010.www1.hp.com/wwpc/au/en/sm/WF06c/A1-12771-64209-64548-64548-26997-14820.html


Contracts for Product Availability and Supply Chain Profits: Buyback Contracts


► Allows a retailer to return unsold inventory up to a specified amount at an agreed upon price

► Increases the optimal order quantity for the retailer, resulting in higher product availability and higher profits for both the retailer and the supplier

► Most effective for products with low variable cost, such as music, software, books, magazines, and newspapers

► High tech industry provides price support for retailers due to price drop rapidly

41



► Downside:

》Results in surplus inventory that must be disposed of, which increases supply chain costs

》Lead the retailer to exert less effort to sell

》May increase information distortion through the supply chain because the supply chain reacts to retail orders, not actual customer demand

42

Revenue Sharing Contracts

Revenue Sharing Contracts

► Manufacture charges the retailer a low wholesale price and shares a fraction of the revenue generated by the retailer.

► The retailer cost will be decreased due to lower overstock cost, thus, retailer will increase the level of product availability resulting higher profits for both manufacturer and retailer.

43

EX:BLOCKBUSTEREX:BLOCKBUSTER

Basher Eyre _Geograph

44

http://en.wikipedia.org/wiki/File:McDonald's_Golden_Arches.svg

版權聲明頁碼作品授權條件作者 /來源

2

Flickr，作者： kennethkonica 。 (http://www.flickr.com/photos/littlebiglens/6878901153/sizes/l/in/pool-60201846@N00/) ，瀏覽日期： 2012/02/20。該網站採取創用CC「姓名標示－禁止改作」3.0版授權釋出。

2本作品轉載自WIKIPEDIA (http://en.wikipedia.org/wiki/File:McDonald%27s_Golden_Arches.svg)，瀏覽日期 2012/03/23 。

6, 13本作品轉載自 hp (http://h10010.www1.hp.com/wwpc/au/en/sm/WF06c/A1-12771-64209-64548-64548-26997-14820.html)，依據著作權法第 46 、 52 、 65條合理使用。

7 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、 52 、 65條合理使用。

7 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft服務合約及著作權法第 46 、 52 、 65條合理使用。

7 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft 服務合約及著作權法第 46 、 52 、 65條合理使用。

16-19, 22, 29


45





http://en.wikipedia.org/wiki/File:Coca-Cola_logo.svg








版權聲明頁碼作品授權條件作者 /來源


11

本作品轉載自 CoolCLIPS網站 (http://dir.coolclips.com/Food/Vegetables/Vegetable_groups/bamboo,_woodcut_style_vc001509.html), Free 150 pixel Jpeg Image，瀏覽日期 2012/03/16。按著作權法第 52 、 65條合理使用。

11 本作品轉載自WIKIPEDIA (http://en.wikipedia.org/wiki/File:Coca-Cola_logo.svg) ，瀏覽日期 2012/02/24 。

30, 32 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft 服務合約及著作權法第 46 、 52 、 65條合理使用。

31, 36, 37 本作品轉載自Microsoft Office 2007多媒體藝廊，依據Microsoft 服務合約及著作權法第 46 、 52 、 65條合理使用。



46

版權聲明

頁碼作品授權條件作者 /來源

44Geograph，作者： Basher Eyre 。 (http://www.geograph.org.uk/photo/834743) ，瀏覽日期： 2012/02/24。該網站採取創用 CC 「姓名標示－相同方式分享」 2.0版授權釋出。

47

determining optimal level of product availability optimal matching of supply and demand (iii)...

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