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TRANSCRIPT
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PRN 53,54, 55, 56
Chapter 16
Managing Facilitating Goods
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Learning objective
y ServicesVs Manufacturing Inventory
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Service Versus Manufacturing
Service Business Manufacturing Business
simultaneous production andconsumption (co-
creation between producer andconsumer)
consumption and production atdifferentstages
manycritical aspects areintangible manycritical aspects aretangible
conceptofinventorymay not bematerial, butcan be
virtual such asrequests and, in healthcare, patients
waiting forservicecan beconsidered a typeof
inventory
usuallyhasinventory and buffers
considerablevariabilityin servicedelivery somevariation
open universein varietyofservicecases closedsetin varietyin productmanufacturing
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Differentiating Characteristics for
stores like
y Setup / Ordering Cost
y Numberof Products
y LimitedShelfSpacey LostsalesVs backorders
y Productsubstitution
y DemandVariance
y Information Accuracy
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Setup / Ordering Cost
y E.g. Steel pipemanufacturing company will havehighersetup/ ordering cost ascomparedto grocerystore.
Manufacturing Services
High Low
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Number Of Products (SKUs)
y E.g.- SKUs fortypical manufacturing companycan be a few
thousand productswhere as forserviceindustrysuchsuper
marketor bookstores itcan vary from 20,000 to 4,00,000
SKUs.y Managerial timespenton ordering decision of anyoneSKU
by a service firmmust beshort.
Manufacturing Services
Low High
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Limited ShelfSpace
Manufacturing Services
Low High
y Shelfspaceis a keyconsideration forretail stores.
y E
ven wallmart supercenters aretoosmall tocarry alldifferentitemsthatmightsell and arecertainlytoosmall to
carry all items productmfg would likethemtocarry.
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Lost Sales Vs Back Order
y Manufacturersworkon backorder andthen fill theorder
weeks later
y Where as a similarsituation in servicesmostly leadsto a lost
sales.
y To avoid lostsalesservicescan usereservations and
appointments
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Product Substitution
y In manyserviceinventorysituation retailerscarryidenticalproducts fromdifferentmanufacturers.
y Soserviceinventorymodel needstoconsidereffectsofcustomersubstitution behavior.
y Hencestocking levelsof productsshould not beconsideredin Isolation ofeachother, group should beconsidered as awhole.
Manufacturing Services
Low High
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Demand Variance
Manufacturing Services
Low High
y The unpredictabilityofdemandisoften greaterin services,
esp. forSKUin given storewithsmall avg. no.of unitssold.
y For eg. 50% ofdry goodsSKUsells fewerthan 1 unit per
weekon avg.H
oweveron a given day an interestedcustomermayclean outentirestock.
y This highvariancemakesinventorydecisionstough.
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Information Accuracy
y Inventory information fromsystemcan bemisleading in caseofServices likesupermarkets.
y This isduetothe presenceof Customer Misshelving
y Eg.Someone picks a Jarofketchup from aisle 9 andchangeshis
mind anddepositsitin aisle 12.
As a resultone lessketchup sitsonshelf but notin computersystem.As a result grocerstill musttrackinventory by physicallywalking the aisle.
y Customer misshelving is perhapsworstin retail bookstores, wherea booktaken out fromonesection isreshelvedbycustomerin
othersection.T
he problemismagnified forthiscase becausebooksdo not lookoutof place, unlike a bottleofketchup keptnextto biscuitscounter.
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Inventory management in Healthcare
services like
y Inventorymanagement andcontrol athospitalsshould be
simple andeective toensurethe availabilityofitems.y Main objectiveis nottominimizethetotal inventorycosts.
y Theirmain concern isthe availabilityofitems, otherwisethe
demandis lostsincemedical careis urgent, andthehospital
stacannotwait for backorders.
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y Thereplenishment processshould besimple.Hospital sta
do notwanttospendtimeon inventorycontrol.
y Tospeed up thereplenishment process, ordersizes arexed
suchthattheremaining unitson stock are notcounted at anorderinstant.
y Fixedordersize policies (FOSPs) arerequired forsuch
situations.
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Inventory management in Healthcare
services
y Medical supplies arestored atmany locationsin a hospital
andin largequantitiestoensurethatstockoutshardlyoccur
y Hence, importanttond a balance between thedesired
servicequality andtherequiredinventory levels.
y Healthcaresupplychains arecharacterized by a multitudeof
divergentsuppliers, products and patientcare unitsthat
arbitrarilyordermultipleitems
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y Proposedconceptstoimprovethe performanceofhealth
caresupplychains:
y Productstandardization : Reducesthe numberofdierent
itemsthathaveto bestocked.
y selecting primevendors: Reduce leadtimes, therefore, the
safetystock aswell.
y Suchdecisionsregarding standardization andthechoiceof
suppliers, areon tactical andstrategical level.
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Traditional versus JIT system in
hospitals
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Inventory management and control in
rental services like
y Itemsin a rental system arehighlyinterchangeable Substitutionishighly prevalent
y Performanceismeasured forthesingleitem (original)demandorfor a group ofitemswhichincludesthesubstitute products fortheoriginal demand.
y
Performanceindicators are:y Availabilityofrequesteditems:measureseffectiveness
y Accessibility:whichmeasuresthe amountoftimerequiredtoobtainan item
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Classication of the customers
reaction to handle excess demand:
y Thecustomerwantstohavethespecic item andmakes areservation (Backorder)
y If available at another location, itsimmediatelytaken otheshelves andsenttothecustomer (Transshipment)
y Thecustomerwantstohave a similaritem thatisimmediately available (Substitution)
y Thecustomer leavestheinventorysystememptyhanded(lostsales)
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and collection control at rental
companies
y Availability being an important performancemeasure, the
rental company needstohavesucient numberof units
availabletosatisfythecustomersrequests
y T
he numberof units (stockquantity)can besolved bymaking a prole ofthecurrentcollection andrelatethisto
the usagedata ofitems andto future predictionson
customersrequests
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y Collection control issubjectedto budget andshelfspace-
there areconstraintson the numberof units a rental
companycan buy, own anddisplay
y T
hecollection in librariesshould be up todate, multiformandrepresentative fortheeld ofknowledge andculture