Now that the trade-offs are clear, consider the product structure depicted in Figure 3-12. Brown boxes (parts4, 5, and 7) represent outside supplier while black boxes represent internal stages within ElecComp’s suppliy chain. Observe that the assembly facility commits a 30-day response time to the customers and keeps inventory of finished goods. More precisely, the assembly facility and the facility manufacturing part 2 both produce to stock. All other stage produce to order.
Figure 3-13 depicts the optimal supply chain that provide customers with the same 30-day response time. Observe that by adjusting committed service time of various internal facilities, the assembly system starts producing to order and keeps no finished goods inventory. On the other hand, the Raleigh and Montgomery facilities need to reduce their committed service time and hence keep inventory.
So where is the push and where is the pull in the optimized strategy? The assembly facility and the the Dallas facility that produces part 2 both operate now in a make-to-order fashion, that is, apull strategy, while the Montgomery facility operates in a make-to-stock fashion, a push-based strategy. The impact on the supply chain is a 39 percent reduction in safety stock!
At this point, it was appropriate to analyze the impact of a more aggressive quoted lead time to the customers. That is, ElecComp executives considered reducing quoted leadtime to the customers from thirty days to fifteen days. Fig.3-14 depict the optimized supply chain strategy in this case. The impact was clear. Relative to the base line (Fig. 3-12), inventory was down by 28% while response time to the customers was halved. See table 3-7 for a summary of the result of study.
Now that the trade-offs are clear, consider the product structure depicted in Figure 3-12. Brown boxes (parts4, 5, and 7) represent outside supplier while black boxes represent internal stages within ElecComp’s suppliy chain. Observe that the assembly facility commits a 30-day response time to the customers and keeps inventory of finished goods. More precisely, the assembly facility and the facility manufacturing part 2 both produce to stock. All other stage produce to order. Figure 3-13 depicts the optimal supply chain that provide customers with the same 30-day response time. Observe that by adjusting committed service time of various internal facilities, the assembly system starts producing to order and keeps no finished goods inventory. On the other hand, the Raleigh and Montgomery facilities need to reduce their committed service time and hence keep inventory. So where is the push and where is the pull in the optimized strategy? The assembly facility and the the Dallas facility that produces part 2 both operate now in a make-to-order fashion, that is, apull strategy, while the Montgomery facility operates in a make-to-stock fashion, a push-based strategy. The impact on the supply chain is a 39 percent reduction in safety stock! At this point, it was appropriate to analyze the impact of a more aggressive quoted lead time to the customers. That is, ElecComp executives considered reducing quoted leadtime to the customers from thirty days to fifteen days. Fig.3-14 depict the optimized supply chain strategy in this case. The impact was clear. Relative to the base line (Fig. 3-12), inventory was down by 28% while response time to the customers was halved. See table 3-7 for a summary of the result of study.
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