inventory policy and reorder point analysis kelley bessette john johnson jeff litchfield matt riskin

Inventory Policy and Reorder Point Analysis

KELLEY BESSETTEJOHN JOHNSONJEFF LITCHFIELD

MATT RISKIN

Branches/Demand Centers

Finished Cores

Component Rebuild Centre

Work in Process

Old Cores

DC DC DC DC DC

Finished Cores CRC

Work in Process

Old Cores

DC DC DC DC DC

Branch – a node in the network Demand Centre – any node in the network with demand over a critical number (5) parts per year

These centres do carry inventory

Branches/Demand Centers

Finished Cores CRC

Work in Process

Old Cores

DC DC DC DC DC

Services the branches, and carries inventory for nodes with sales less than a critical value

Branches/Demand Centers

Finished Cores

Work in Process

Old Cores

DC DC DC DC DC

CRC

This facility is located in Edmonton, and is responsible for refurbishing used cores

Component Rebuild Centre

Branches/Demand Centers

Finished Cores

CRC

Work in Process

Old Cores

DC DC DC DC DC

Demand Centres

Finished Cores

CRC

Work in Process

Old Cores

45

Finished Cores

CRC

Work in Process

Old Cores

45

Simulation of demand

• A variation of Croston's Intermittent Method

Finished Cores

CRC

Work in Process

Old Cores

45

Returning Cores

• Assign return time

• Update return time daily on a basis

Demand Centres

CRC

Work in Process

Old Cores

45Refurbishing

• Assign processing time

• Track cores in process

Demand Centres

Finished Cores

CRC

Work in Process

Old Cores

45

Distribution

• Where finished cores go

• Lead Time

• Track Cores en-route

Where to locate inventory Branch versus Distribution Centre

Re-order point at each demand centres/distribution centres

Number of cores in system

Outputs of Model

Model Run ResultsPart Number: 6V5227

Store Number: 10

Costs Vs. Re-Order Point

02000400060008000

10000120001400016000

1 2 3 4 5 6 7 8 9

Re-Order Point

Co

st

($)

0

0.2

0.4

0.6

0.8

1

1.2

Fill

Ra

te (

%)

Holding Costs Lost Contribution Total Cost Fill Rate

Potential Savings and Improvements

Finished Goods Inventory Cost Savings

0%

20%

40%

60%

80%

100%

1153306 1W1695 2W8005 6V5227

Part Number

Perc

enta

ge

Savi

ngs

Project Accomplishments

Development of a product that can be applied to 900 parts

Simulating time event in Excel

Model construction and implementation in a three month period

Questions?(Model Preview)