GLOBAL SUPPLY CHAIN MANAGEMENT SIMULATION

16 th March 2011

Name: Aditya Chandra

Email: adc65@pitt.edu

Mailbox: 116

GLOBAL SUPPLY CHAIN MANAGEMENT SIMULATION

The following general Strategy was employed for this simulation

Calculated whether to Overstock or Understock the two phone models Decided own demand estimates based on above point as well as the amount of

standard deviation for each model of phone. Features of the phones were decided based on inputs from the Design room members.

The number of features or the ‘new-ness’ was limited in cases to decrease the uncertaininty in demand (as price also increased) unless a feature was thoroughly expected to be very popular.

First level of production distribution was done on the basis of cost. Priority of production was given to on-shore production facilities. The production of each model was then distributed more in the favour of Model B as it is a high margin product and its demand was uncertain. The remaining production capacity was then assigned to Model A.

The on-shore production facilities were operating at 100% utlization from the beginning itself.

Decisions of doing the Market Survey: This option wasn’t exercised in Year 1 but was used later on.

Decisions on Change Order: This decision was made based on inputs of the above market survey or whether there was a stockout (with 2 or more exclamations) or whether the inventory buildup was too high for a particular Model.

YEAR WISE STRATEGY

1. Year 1 Market Survey option wasn’t used to test the result without this option Model B was understocked excessively at first Change order needed to be done to prevent loss of possible profits coming from Model

B.2. Year 2

Forecast estimates for Model B was increased from the earlier Year because of high understocking.

Forecast estimates for Model A were decreased to minimize the overstocking. This however resulted in zero inventory at the end of the time period and constant understocking throughout the period.

Market Survey option was used to better estimate the demand A Change order was required to prevent too much understocking of Model A but this

was insufficient3. Year 3

Forecasting was modified in order to prevent stockout of Model A This time resulted in unutilized stocks of Model A and Model B

Change order was required to decrease production of Model B due to external factors which predicted the decrease in demand

4. Year 4 Went with a conservative forecast estimate of Model B due to the very high standard

deviation in the forecasted demand. Due to 100% utilization of on shore production facilities the demand for Model B could

not be increase instantly and hence outsourced facilities needed to be used which had a big lead time. Also in this case there was a need felt of using the extra production facility which had so far not been used in previous years.

Large amount of Stockouts were experienced for Model B and production of Model A had to be reduced to make space for Model B. But even this did not help.

LEARNINGS

1. If the demands of a phone model are unpredictable then keep the onshore production facility underutilized in order to change the production if required.

2. Consensus is not something one should use. Better to look at Means and standard deviation3. Previous data of the forecasters could be used to better predict the forecast for the current

year.4. Definitely need to develop a better model to do a cost benefit analysis (based on probabilities)

of whether to go for a Change order or not.

APPENDIX

YEAR 1

YEAR 2

YEAR 3

YEAR 4