Economic lot size model= model that illustrates the trade off between ordering and storage cost.

Risk pooling= suggests that demand variability is reduced if one aggregates demand across location.
Standard variation= is a measure of how much demand tends to vary around the average
Coefficient of variation= is the ratio of standard deviation to the average demand.
LECTURE 1: Supply chain design involves deciding and setting up local and/or global supply chain infrastructure including: markets & countries in which to have a presence ■ network of plants- number of
plants and their locations ■ capacities of plants ■ technology to be used in each plant ■ selection of suppliers and their locations ■ assigning suppliers to plants ■ markets each plant should serve ■ network
of distribution centers/warehouses- number and locations ■ transportation network and modes ■ retail stores – numbers and their locations.
for an existing company supply chain redesign may be necessitated because :new products have been introduced ■ Existing products have gone through some change ■ Company is using new and advanced
technology, new materials ■ Company has grown in size, sales volume, or market share ■ Company has entered new markets (domestic or international) ■ Company has acquired another company or merged
with another. +Company wants to reduce its carbon footprint ■ Nature of competition has changed ■ New suppliers and/or new supply sources (domestic or global) ■ New government regulations (domestic
or host country)
three major methods to help managers tackle supply chain design/redesign problem: ■ optimization (Involves building a mathematical model of the system and finding the best solution to the model. Most
frequently used techniques include linear programming, or any appropriate optimization method.■ simulation =assessing the performance of a specific configuration of a system. It can provide answers to
“what if” questions for changes in a particular system design.does not necessarily provide an optimum solution. usually use d when the system is too complex for optimization. ■ heuristics =Is a common
sense, rule of thumb, or intuitive judgment approach to problem solving.provides a “satisficing” or “good enough” solution.
Productivity vs efficiency =Efficiency indicates the degree of attainment of an optimum outcome, a preselected goal, or the best practice.• Efficiency can be measured as the ratio of output obtained from a
process to the maximum output that is possible for the amount of input used. While the productivity measure can theoretically be any nonnegative number, efficiency is expressed as a percentage and cannot
be greater than one. • Also, productivity of economic units can be compared even if they use different technologies. Efficiency comparisons, however, are meaningful only among economic units using similar
technologie sand inputs to produce similar outputs. In its simplest form, an explanation of productivity versus efficiency is the difference between quantity and quality. Productivity - is the ability to get stuff
done and make things. Efficiency - is the ability to be productive using minimal time and resources.
The most important factors in raising productivity=technological developments that reduce labor requirement in the production of goods and services, or increase output without increasing labor input.+
organization and managementof productive activities.+ Short run conditions (Cyclical, seasonal) + implementing better work methods and better management practices+ investments into developing human
resources contribute to productivity growth+ . Employees are usually the best source of ideas for improvement in production processes and methods, and eliminating waste and defects.
Complexity= globalization and consolidations make supply chain more complex. more variables that need to be monitored and controlled in a supply chain the more complex the operation is. For instance,
the ability to match supply chain strategies with product characteristics. + the ability to manage effectively uncertainty and risk. (outsourcing or offshoring increase risks). complexity in supply chains is defined
as the quantitative variations (deviations) between actual and predicted flows caused by uncertainty and variety through material and information flows.
LECTURE2:cost leadership and differentiation strategies: An organization would be following a cost leadership strategy if it is striving to be the low-cost producer in its industry. must pay close attention to
cost control and overhead minimization, and work hard to exploit the learning curve effect when it exists. Cost leadership provides protection for the organization against pressures from various sources: ―
Customers cannot put too much pressure to reduce its prices, they are already at the lowest levels. ― Suppliers will not have much power against a low cost producer if it has economies of scale, and hence
is a significant customer for the supplier. ― Cost leadership also provides protection against new entries and substitutes. Differentiation strategy requires that an organization be unique in a way that is
valued by its customers. Uniqueness is industry-wide and may include product attributes, delivery system, or marketing that meet specific needs of a group of customers. base d on the assumption that
customers are willing to pay a premium price for the uniqueness the firm offers.
Focus strategy= is built on the concept of serving a limited segment of the potential market very well.By focusing on a limited segment of the market, an organization may be able to tailor its products,
operations and all the relevant activities to serve the selected segment effectively and efficiently. It has two forms: cost focus and differentiation focus. The difference between these and the previous two
generic strategies is that, cost focus and differentiation focus are very limited in scope. They are designed to achieve competitive advantage in costs or differentiation in the selected segment.
CHAPTER 1: approach to manage risks in supply chain Building redundancy into the supply chain so that if one portion fails, for example, a fire at a warehouse or a closed port, the supply chain can still satisfy
demand. • Using information to better sense and respond to disruptive events. • Incorporating flexibility into supply contracts to better match supply and demand. • Improving supply chain processes by
including risk assessment measures.
Issues related to strategic level; Because the strategic level may involve a relatively lengthy planning horizon, decision makers would typically not have enough information to specify all parameters with
certainty+ high level of uncertainty associated (political environment)+time dependency tactical level=Customers demand highly individualized products within short lead times, so product variety is a primary
issue at the tactical level.+ need to have enough information on how long it takes to produce an item, operational level: scheduling problems/errors, can affect customer service, coordination between
different networks is more complicated.
Question7: : A small number of centrally located warehouses allow a firm to take advantage of risk pooling in order to increase service levels and decrease inventory levels and costs.+ the need to pay rent
or utility expenditures for different warehouses is reduced.outbound transportation cost is typically higher, and delivery lead times are longer. Nonetheless, a larger number of warehouses closer to the end
customers, a firm can decrease outbound transportation costs and delivery lead times.+ better customer service. There is the possibility of inventory transfers between depots if a depot run out of a particular
item.
Question 10: redundancy can be built in the supply chain: if one portion fails, the supply chain can still satisfy demand.provides some breathing room to continue operating after a disruption. However, it is
a temporary and very expensive measure since the company must pay for the redundant stock, capacity and workers
CHAPTER2: relationship between the optimal order, or production, quantity and average demand: the optimal order quantity is not necessarily equal to forecast, or average demand. Indeed, the OQ
depends on relationship between marginal profit achieved from selling an additional unit and marginal cost. The fixed cost has no impact on the production quantity, only on the decision whether or not to
produce. As the order quantity increases, average profit typically increases until the production quantity reaches a certain value, after which the average profit starts decreasing.
Continuous review vs periodic review: CR the inventory is reviewed continuously , and an order is placed when the inventory reaches a particular level or reorder point. (Q,R) policy – whenever inventory
level falls to a reorder level R, place an order for Q units PR= the inventory is reviewed at regular interval and an appropriate quantity is ordered after each review. it is impossible or inconvenient to frequently
review inventory and place orders if necessary. The Q and R policy can’t be directly implemented since the inventory level may fall below the reorder point when the warehouse places an order. So modified
version called QR and sS policy. Two inventory level s and S. If the inventory position falls below s, order enough to raise the inventory position to S.
Risk pooling sentence: Demand variability is reduced if one aggregates demand across locations, across products or even across time. For example, if demand is aggregated across different locations, it
becomes more likely that high demand from one customer will be offset by low demand from another. This reduction in variability allows a decrease in safety stock and therefore reduces average inventory.
Question 6: The reorder level s = L * AVG + z * STD * √𝐿 has two components. The first component L * AVG covers the expected demand during lead time, and the second component z * STD * √𝐿 is safety
stock that protects against deviations from the expected demand during lead time. So we assume that before the order arrives, the first component is diminished completely and the inventory level is z *
STD * √𝐿 but when the order arrives it becomes Q + z * STD * √𝐿
Service level: when the centralized and decentralized systems have the same total safety stock, the service level provided by the centralized system is higher. The magnitude of the
service level will depend on the coefficient of variation and the correlation between the demand from different market. Safety stock:it decreases as the firm moves from a
decentralized to a centralized system. The number of decrease depends on a number of parameters, including the coefficient of variation and the correlation between the demand
from different market.Echelon inventory: Echelon inventory at the warehouse is the inventory at the warehouse, plus all of the inventory in transit to and in stock at each of the
retailers. echelon inventory position at the warehouse is the echelon inventory at the warehouse, plus those items ordered by the warehouse that have not yet arrived minus all
items that are backordered. Echelon lead time= lead time between the retailer and the distributor plus the lead time between the distributor and its supplier, the wholesale
CHAPTER 3: steps network planning= Find the right balance between inventory, transportation and manufacturing costs. Process has 3 steps : Network design Number, locations
and size of manufacturing plants and warehouses .Assignment of retail outlets to warehouses Major sourcing decisions Typical planning horizon is a few years Inventory
positioning: Identifying stocking points Selecting facilities that will produce to stock and thus keep inventory Facilities that will produce to order and hence keep no inventory
Related to the inventory management strategies Resource allocation: Determine whether production and packaging of different products is done at the right facility What
should be the plants sourcing strategies? How much capacity each plant should have to meet seasonal demand?
Effect of increasing the number of warehouses in a supply chain network. An improvement in service level due to the reduction in average travel time to the customer+ an increase
in inventory costs due to increased safety stocks required to protect each warehouse against uncertainties in customers demands+ an increase in overhead setup cost+ a reduction
in outbound transportation costs, transportation costs form the warehouses to the customers+ an increase in inbound transportation cost: transportation cost from the suppliers
and/or manufacturers to the warehouses.
Main components of warehousing and distribution center costs: Warehousing and distribution center costs include 3 main components: Handling costs which include labor and
utility costs that are proportional to annual flow through the warehouse + Fixed Costs which capture all cost components that are not proportional to the amount of material that
flows through the warehouse. The fixed cost is typically proportional to warehouse size but in a nonlinear way. + storage costs which represent inventory holding costs, which are
proportional to average positive inventory levels.