Policies for an Integrated SCPolicies for an Integrated SC

A SCA SC

PrinciplesPrinciples

Inventory depends on demand Inventory depends on demand during Lead Timeduring Lead Time

Lead Time = L + Backlog Previous Lead Time = L + Backlog Previous StationStation

Or Max(L + backlog) over all Or Max(L + backlog) over all previous stationsprevious stations

L = Processing Time +

Transportation +Lot Time +…

(7/11)

Demand overthe delivery lag

Backlog

Base Policy: Keep Inv. Position = sBase Policy: Keep Inv. Position = s

DLag = D*(L+Tb)

SummarySummary

Pr ,1) ( )

2) 0

3)

Lag j edecesors j b j

Lag Lag

Lag

b

D D Max L T

if s D then IN s D remaining inventory

else B D s

BFinally T

D

In generalIn general

)(

1

iSucjjQiQ

n

i iQih

iQiG

Min

Nested Stationary Power of 2Nested Stationary Power of 2

5 10 15 20 25 30123456789101112

Very FlatVery Flat

Optimal power of 2 policy less Optimal power of 2 policy less than 16% worse than Optimalthan 16% worse than Optimal

BOMT = (1,1,1,2,2,2,2,8,16,16,16,16)

BOMT = (1,1,1,2,2,2,2,8,16,16,16,16)

1,2,3

UpstreamUpstream

UpstreamUpstream

In generalIn general

2

1

Nested Power of

Gn iMin h Qi iQi i

Lot sizesLot sizes

USE the SOLVERUSE the SOLVER