SUMMARY of DIGITAL SCM : Lecture 17&18

Air Vs Ocean Shipment Analysis New Product Introduction-Case Study

Data to be considered: • Footwear Manufacturer, Short Life Cycle & low demand accuracy
✓ Product Cost • Goal: Predict demand for new products twelve months prior to
✓ Mean Weekly Demand product in market.
✓ Review Period • Scope: About 2000 different SKUs
✓ Ocean & Air Lead times Step 1: Historical Data (Data from all the products sold)
✓ Ocean & Air Shipping Cost Step 2: Plotting the demand curve for the data
• At higher level it is the trade off between lead time and Step 3: Identifying number of curves which have same behavior of
cost demand curves and use machine learning techniques like clustering(K-
mean)
Base Stock Level Policy
Step 4: Use Classification tree and map the new product from the
Average Demand during an interval of r days, L being the lead
clustered data.
time: (r+L)*(AVG) (AVG: Average daily demand)
Using Forecast error to check the accuracy
Safety Stock: z* STD*SQRT(r+L)
Implementation Results: Decreased lost sales
Base Stock: (r+L)(AVG)+z*STD*SQRT(r+L)
Network Planning
• Key issues: Optimal number of location, size of warehouses, sourcing strategy, best distribution channels
• Objective is to balance service level against purchasing cost, inventory handling costs, facility costs, transportation costs
• Minimum annual cost configuration of the distribution network that satisfies product demand at specified customer service levels.
• Major tools: Mapping, Data, Engine
• Comparison between cost minimisation and service maximisation networks
• Cost differences observed on Aggregation of Customer as well as with Aggregation of Product Category
Impact of Aggregating Customers Strategy for Product Aggregation
• Customer zone balances the loss of accuracy due to over • Placing all SKUs in a source group
aggregation and needless complexity • Aggregating the SKUs by similar logistics characteristics (Weight,
• Efficiency of aggregation is affected by number of Volume, Holding Cost)
aggregated points and distribution of customers in each
zone