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Optimize monthly inventory level of central warehouse

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					Global SCM




2008.11.11

Optimize monthly inventory level of central warehouse,
consider previous month demand




                             Term paper progress
                             200883471 SONG YUN HO
                       Optimize monthly inventory level of central warehouse,
 Global SCM            consider previous month demand



INTRODUCTION


  Well made inventory plan can be reduce inventory cost

  In the One product inventory model, If each retailer shares one warehouse, It
   means that reduce cost more than distributed warehouse

  Optimize inventory level of central warehouse can be change every month or
   season

  This study want to decide Optimize monthly inventory level of central warehouse,
   consider previous month demand
                       Optimize monthly inventory level of central warehouse,
 Global SCM            consider previous month demand



Problem

                                                                 Retailer 3
                    Retailer 2




                                         Plant & Central                Retailer 4
                                         warehouse


                    Retailer 1

                                                                Retailer 5

 Optimize central warehouse inventory level
 Consider previous month demand
                             Optimize monthly inventory level of central warehouse,
 Global SCM                  consider previous month demand



How to decide optimal inventory
level of central warehouse                                      Service level


                                          Safety stock level
                    Reorder point



                                         Order amount                           Demand during lead time


           Maximum capacity of warehouse

                                                                            Daily demand    Lead time

 Survey inventory level
                                          Stock in                       Stock out

                           Optimal Inventory level ?

                                                     Central warehouse
                            Optimize monthly inventory level of central warehouse,
 Global SCM                 consider previous month demand



Assumption
     Each retailer have safety inventory level during lead time
     Each retailer follows (s,S) policy
     Each retailer lead time already defined
     We know previous month demand data
     Plant & warehouse are located at same place

Define Parameter
  D = Demand per day
  L = lead time
  T = Cycle time
  C = Maximum capacity
  s= Lead Time x AVGD
  S= Maximum capacity of warehouse
  AVGD= average daily demand
                           Optimize monthly inventory level of central warehouse,
 Global SCM                consider previous month demand



Mathematical model
   N = Number of retailer
   M = Number of day during One cycle
   Di = daily demand per r retailer (i ∈ 1, 2, · · 30, r ∈ 1, 2, · · 5)
   Ri = retailer (i ∈ 1, 2, · · 5)

   Dpmt r= demand during one cycle time per r retailer




     Minimize Ri Di 
                     in    im
                            Optimize monthly inventory level of central warehouse,
 Global SCM                 consider previous month demand



Generate historical data



                       retailer1    retailer2    retailer3    retailer4    retailer5

     Demand                Ran.         Ran.         Ran.         Ran.         Ran.
                         Between      Between      Between      Between      Between
     Per day(D)          (80,170)     (60,120)      (20,90)     (60,140)     (50,120)

     Lead time(L)           3            2            1            3            4
                       C  L  AVGD C  L  AVGD C  L  AVGD C  L  AVGD C  L  AVGD
     Cycle time(T)
                             D            D            D            D            D
     Capacity(C)          2000         1500         3000         2000         1500



     AVGD= average daily demand
                                                                                Optimize monthly inventory level of central warehouse,
        Global SCM                                                              consider previous month demand



       Example
                                                      Demand
Day          Retailer1           Retailer2         Retailer3        Retailer4         Retailer5
         1                124                106               36               119                91
         2                145                 93               60               136               102
         3                 96                 75               59                89                97
         4                129                 65               83               103               107
         5                164                107               56                64                94
         6                 97                106               82                84                72
         7                101                115               20                91                85
         8                123                120               66                61                79         retailer1     retailer2      retailer3   retailer4   retailer5
         9                 94                108               33                76               117


                                                                                                        D        119.2          95.8            55         89.4        89.6
        10                108                115               55               118                77
        11                103                119               55               108               115
        12                129                105               57                61               120
        13                164                 92               45               101               102    L         3              2             1           3           4
        14                133                 60               88                84                73
        15
        16
                          109
                           99
                                             112
                                             104
                                                               76
                                                               46
                                                                                 83
                                                                                 65
                                                                                                   60
                                                                                                   98
                                                                                                        T         16.8          15.7           54.5        22.4        16.7
        17                104                 66               27                79                78
        18                110                 76               34                74                69   C        2000           1500           3000       2000        1500
        19                 88                 67               76                98               114
        20                133                 66               61                97                54
        21                 99                102               53                68               111
        22                117                114               25                66                72
        23                122                 98               32                96                89   D = Demand per day, L = lead time,
        24                120                119               27                89                86   T = Cycle time, C = Maximum capacity
        25                118                115               73                76                73
        26                132                 78               88                60                77
        27                118                 74               64                86                99
        28                141                109               57                99               103
        29                 90                101               62               128                79
        30                166                 86               55               124                66
avg,                     119.2          95.7667           55.0333          89.4333           88.6333
                         Optimize monthly inventory level of central warehouse,
 Global SCM              consider previous month demand



Further Research
   Define problem more clearly
   Make mathematical model
   Find optimal value by solver
             Optimize monthly inventory level of central warehouse,
Global SCM   consider previous month demand




             Thank You!!

				
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