Inventory Management With Supply Chain

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Inventory Management With Supply Chain

  1. 1. Inventory Management in Closed-Loop Supply Chain 2004. 8. 21 임 치 훈
  2. 2. <ul><li>Business Aspects of Closed-Loop Supply Chains </li></ul><ul><ul><li>Rommert Dekker et al., Inventory Control in Reverse Logistics </li></ul></ul><ul><li>Karl Inderfurth, Optimal policies in hybrid manufacturing/remanufacturing systems with product substitution </li></ul>
  3. 3. <ul><li>The Carnegie Bosch Institute </li></ul><ul><li>International Conference on Closed-Loop Supply Chains </li></ul><ul><li>Business Aspects of Closed-Loop Supply Chains </li></ul><ul><li>May 31 – June 2, 2001 </li></ul><ul><li>Pittsburgh, Pennsylvania </li></ul><ul><li>Inventory Control in Reverse Logistics </li></ul><ul><li>Rommer Dekker and Erwin van der Laan, </li></ul><ul><li>Erasmus University Rotterdam, The Netherlands </li></ul>
  4. 4. A continuous time inventory model for a product recovery system with multiple options Classification of Inventory Control Problems Inventory Control for Direct Reuse The Use of Accounting Information Introduction Inventory Control for Value-Added Recovery Summary and Outlook
  5. 5. A schematic overview of reverse logistics situations
  6. 6. Classification of Inventory Control Problems <ul><li>Return reason </li></ul><ul><ul><li>Rework </li></ul></ul><ul><ul><li>Commercial return, outdated product </li></ul></ul><ul><ul><li>Product recall </li></ul></ul><ul><ul><li>Warranty return </li></ul></ul><ul><ul><li>Repair </li></ul></ul><ul><ul><li>End-of-use return </li></ul></ul><ul><ul><li>End-of-life return </li></ul></ul><ul><li>Recovery option </li></ul><ul><ul><li>Selling or donation </li></ul></ul><ul><ul><li>Store and reuse (direct reuse) </li></ul></ul><ul><ul><li>Value-added recovery </li></ul></ul><ul><ul><li>Recycle </li></ul></ul><ul><ul><li>Disposal </li></ul></ul>
  7. 7. Inventory Control for Direct Reuse <ul><li>Single-period Inventory Decision Problem </li></ul><ul><ul><li>Considers only order quantity </li></ul></ul><ul><ul><li>Fashion product, final order problem </li></ul></ul><ul><ul><li>Vlachos and Dekker (2000) </li></ul></ul><ul><ul><ul><li>Known percentage of returns arrives in time to be resold </li></ul></ul></ul><ul><ul><ul><li>Most return recovery options can be reduced to the standard newsboy optimality equation </li></ul></ul></ul><ul><li>Multi-period Infinite Horizon Inventory Decision Problem </li></ul><ul><ul><li>Considers both reorder point and order quantity </li></ul></ul><ul><ul><li>Spare parts control of a refinery </li></ul></ul><ul><ul><li>Fleischmann et al. (1997) </li></ul></ul><ul><ul><ul><li>Independent Poisson processes for demands and returns </li></ul></ul></ul><ul><ul><ul><li>(s,S) policies remain optimal </li></ul></ul></ul><ul><li>Multi-period Finite Horizon Inventory Decision Problem </li></ul><ul><ul><li>Considers both reorder point and order quantity </li></ul></ul><ul><ul><li>Demand and returns are specified per period </li></ul></ul><ul><ul><li>Richter and Sombrutzki (2000) </li></ul></ul><ul><ul><ul><li>Reverse economic lot sizing model with an unlimited return quantity </li></ul></ul></ul><ul><ul><ul><li>Zero-inventory regeneration property </li></ul></ul></ul>
  8. 8. Inventory Control for Direct Reuse <ul><li>Netting Approach </li></ul><ul><ul><li>Considers returns as negative demands </li></ul></ul><ul><ul><li>The net demands are treated with traditional methods for single source inventory control </li></ul></ul><ul><ul><li>Van der Laan et al. (1996) </li></ul></ul><ul><ul><ul><li>Satisfactory method when return rates are low </li></ul></ul></ul><ul><ul><ul><li>The net demand is much more variable than the total demand </li></ul></ul></ul><ul><li>Direct Reuse in Network Inventories </li></ul><ul><ul><li>Considers containers and reusable packaging </li></ul></ul><ul><ul><li>Determines how many containers are needed at each depot for a given time </li></ul></ul><ul><ul><li>Shen and Khoong (1995) </li></ul></ul><ul><ul><ul><li>Decision Support System for this problem </li></ul></ul></ul><ul><li>Disposal </li></ul><ul><ul><li>When return rates exceed demand rates </li></ul></ul>
  9. 9. Inventory Control for Value-Added Recovery <ul><li>Late 1960’s inventory control for repairable inventory </li></ul><ul><ul><li>Physical closed-loop system </li></ul></ul><ul><ul><ul><li>After repair the items stay with or return to the original owner/user </li></ul></ul></ul><ul><ul><li>A demand and a production return always coincide </li></ul></ul><ul><li>Product Remanufacturing </li></ul><ul><ul><li>Functional closed-loop system </li></ul></ul><ul><ul><li>Variability and uncertainty in the timing and quantity of product returns </li></ul></ul><ul><ul><ul><li>-> Difficult to balance supply with demand </li></ul></ul></ul><ul><ul><li>Variability and uncertainty in the quality of returned products </li></ul></ul><ul><ul><ul><li>-> Operations involved with remanufacturing are usually of a very stochastic nature </li></ul></ul></ul><ul><ul><li>Toktay et al. (1999) – Kodak single-use camera </li></ul></ul><ul><ul><li>Krikke et al. (1999) – copiers at Océ </li></ul></ul>
  10. 10. Inventory Control for Value-Added Recovery
  11. 11. Inventory Control for Value-Added Recovery <ul><li>The most common assumptions </li></ul><ul><ul><li>Inventory systems are single item, single component systems </li></ul></ul><ul><ul><li>Product returns are independent of product demands </li></ul></ul><ul><ul><li>The demand and return processes are Poisson processes </li></ul></ul><ul><ul><li>Yields are certain </li></ul></ul><ul><ul><li>Processes are stationary </li></ul></ul><ul><ul><li>Leadtimes are constant and independent of the order size </li></ul></ul>
  12. 12. Inventory Control for Value-Added Recovery <ul><li>Optimal Policies </li></ul><ul><ul><li>Inderfurth (1997) </li></ul></ul><ul><ul><ul><li>(L,M,U) policy </li></ul></ul></ul><ul><ul><ul><li>Remanufacturing leadtime = manufacturing leadtime, no fixed setup cost </li></ul></ul></ul><ul><ul><li>Minner and Kleber (1999) </li></ul></ul><ul><ul><ul><li>Deterministic setting with dynamic demand and return patterns </li></ul></ul></ul><ul><ul><li>Inderfurth et al. (2001) </li></ul></ul><ul><ul><ul><li>n different remanufacturing options, each sold on a separate market </li></ul></ul></ul><ul><li>Heuristic Policies </li></ul><ul><ul><li>Muckstadt and Isaac (1981) </li></ul></ul><ul><ul><ul><li>Manufacturing – continuous review (s,Q) policy </li></ul></ul></ul><ul><ul><ul><li>Product returns are remanufactured upon arrival with stochastic service times and limited capacity </li></ul></ul></ul><ul><ul><li>Van der Laan et al. (1997) </li></ul></ul><ul><ul><ul><li>Continuous review push and pull policies </li></ul></ul></ul><ul><ul><ul><li>The push policy concentrates stocks in serviceable inventory </li></ul></ul></ul><ul><ul><li>Inderfurth and Van der Laan (1998) </li></ul></ul><ul><ul><ul><li>Treats the remanufacturing leadtime as a decision variable </li></ul></ul></ul>
  13. 13. Inventory Control for Value-Added Recovery <ul><li>Dependency relation between demands and returns </li></ul><ul><ul><li>Enables forecasts for timing and quantity of product returns </li></ul></ul><ul><ul><li>Kiesm üller and Van der Laan (2001) </li></ul></ul><ul><ul><ul><li>If good forecasts are incorporated in the inventory policy, they considerably improve system performance </li></ul></ul></ul><ul><ul><li>Kelle and Silver (1986) </li></ul></ul><ul><ul><ul><li>Tracking and tracing of individual products leads to superior return forecasts </li></ul></ul></ul>
  14. 14. <ul><li>Optimal policies </li></ul><ul><li>in hybrid manufacturing/remanufacturing systems </li></ul><ul><li>with product substitution </li></ul><ul><li>International journal of production economics 90 (2004) 325-343 </li></ul><ul><li>Karl Inderfurth* </li></ul><ul><li>*Faculty of Economics and Management, Otto-von-Guericke-University Magdeburg, Magdeburg, Germany </li></ul>
  15. 15. A continuous time inventory model for a product recovery system with multiple options General model formulation Case A. Short manufacturing leadtime Case B. Short remanufacturing leadtime Decision problem Managerial insights Further research
  16. 16. Decision problem <ul><li>If remanufactured products are significantly different from new ones, they are sold in different markets to different customers at different prices </li></ul><ul><li>If a company is willing to offer its customers of remanufactured items a higher-valued original one in an out-of-stock situation. ( downward substitution ) </li></ul>
  17. 17. General model formulation <ul><li>Optimally coordinated manufacturing/remanufacturing policy under product substitution </li></ul><ul><ul><li>Objective : maximize the expected profit </li></ul></ul><ul><ul><li>Single-stage, single-period </li></ul></ul><ul><ul><li>Independent stochastic demands for both product types </li></ul></ul><ul><ul><li>Deterministic leadtimes for manufacturing and remanufacturing </li></ul></ul><ul><ul><li>Stochastic returns of used products </li></ul></ul><ul><ul><li>Returned items which are not remanufactured will be disposed of </li></ul></ul>
  18. 18. General model formulation <ul><li>Notation </li></ul><ul><ul><li>i = M for manufacturing(MP) </li></ul></ul><ul><ul><li>i = R for remanufacturing(RP) </li></ul></ul>
  19. 19. General model formulation <ul><li>Revenues from selling and salvaging MPs/expected revenues </li></ul><ul><li>Substitution quantity/expected amount of substitution </li></ul><ul><li>Expected total profit </li></ul><ul><li>Bound </li></ul>
  20. 20. Case A. Short manufacturing leadtime <ul><li>At the time of the manufacturing decision the number of returns R which can be used for remanufacturing is known with certainty </li></ul><ul><li>Optimization problem </li></ul>
  21. 21. Case A. Short manufacturing leadtime <ul><li>Theorem 1 </li></ul><ul><ul><li>TP( y M , y R ) is jointly concave in y M and y R </li></ul></ul><ul><ul><li>-> Optimal reaction function </li></ul></ul><ul><li>Theorem 2, 3 </li></ul><ul><ul><li>S M ( y R ) is monotonously decreasing with </li></ul></ul><ul><ul><ul><li>: Newsboy solution of the separate manufacturing problem ( y R ->∞) </li></ul></ul></ul><ul><ul><ul><li>: Solution in case of zero RP inventory ( y R = 0) </li></ul></ul></ul><ul><ul><li>S R ( y M ) is monotonously decreasing with </li></ul></ul><ul><ul><ul><li>: Newsboy solution of the separate remanufacturing problem ( y M = 0) </li></ul></ul></ul><ul><ul><ul><li>: Solution in case of unlimited MP inventory ( y M ->∞) </li></ul></ul></ul>optimal ‘order-up-to-levels’
  22. 22. Case A. Short manufacturing leadtime <ul><li>Optimal policy structure in Case A </li></ul>
  23. 23. Case B. Short remanufacturing leadtime <ul><li>At the time of the manufacturing decision the return uncertainty may not yet have been completely revealed </li></ul><ul><li>Optimization problem for remanufacturing </li></ul>
  24. 24. Case B. Short remanufacturing leadtime <ul><li>Theorem 4 </li></ul><ul><ul><li>TP R ( y R , y M , x R ,R ) is jointly concave in y R </li></ul></ul><ul><ul><li>-> Optimal reaction function </li></ul></ul><ul><ul><li>from </li></ul></ul><ul><li>Theorem 5 </li></ul><ul><ul><li>U R ( y M ) is identical to function S R ( y M ) in Case A </li></ul></ul><ul><ul><li>So it is monotonously decreasing with </li></ul></ul><ul><li>Optimal remanufacturing decision </li></ul><ul><li>Optimal profit from remanufacturing </li></ul>
  25. 25. Case B. Short remanufacturing leadtime <ul><li>Optimization problem for manufacturing </li></ul><ul><li>Theorem 6 </li></ul><ul><ul><li>TP M ( y M , x M , x R ) is concave in y M </li></ul></ul><ul><ul><li>-> Optimal reaction function </li></ul></ul><ul><ul><li> from </li></ul></ul><ul><li>‘ Manufacture-up-to policy’ </li></ul>
  26. 26. Case B. Short remanufacturing leadtime <ul><li>Optimal policy structure in Case B </li></ul>
  27. 27. 정리 <ul><li>Closed-Loop Supply Chain 의 Production Planning and Control </li></ul><ul><ul><li>현재까지는 Inventory control 분야에 많이 집중되어 있음 </li></ul></ul><ul><ul><li>Optimal policy 에 관한 연구들은 실제 사례에 사용하기 어려움 </li></ul></ul><ul><ul><li>Heuristic method 사용한 inventory control 에 대한 논문 review 계획 </li></ul></ul>

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