Pertemuan 13
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Managing Uncertainty in a Supply
Chain: Safety Inventory
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Topics
• The role of safety inventory in supply chain
• Determining the appropriate level of safety
inventory
• Impact of supply uncertainty on safety inventory
• Impact of aggregation on safety inventory
• Impact of replenishment policies on safety
inventory
• Managing safety inventory in a Multiechelon
Supply Chain
• The role of IT in Inventory Management
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The role of safety inventory in supply chain
Safety inventory is inventory carried to satisfy
demand that exceeds the amount forecasted
for a given period.
Safety inventory is carried because demand is
uncertain, and product shortage may result if
actual demand exceeds the forecast demand.
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Determining the appropriate level of
safety inventory
The appropriate level of safety inventory :
• The uncertainty of both demand and supply
• The desired level of product availability
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Impact of supply uncertainty on safety
inventory
Supply chain must account for supply
uncertainty when planning safety inventories.
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Impact of aggregation on safety inventory
In practice, supply chain have varying degrees of
inventory aggregation.
The goal is to understand how aggregation in each
of these cases affects forecast accuracy and safety
inventories.
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Managing safety inventory in a Multiechelon
Supply Chain
All inventory between a stage and the final
customer is called the echelon inventory.
Echelon inventory at a retailer is just the
inventory at the retailer or in the pipeline coming
to the retailer.
If the inventory is inexpensive to hold and
customers are time sensitive, it is better to carry
more safety inventory downstream, closer to the
final customer
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The role of IT in Inventory Management
• Two most significant contributions of IT
systems can be improved inventory visibility
and better coordination in the supply chain
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-----------------------------------------------Sourcing Decisions in a Supply Chain
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Topics
•The role of sourcing in a supply chain
•In-house or outsource
•Third- and Fourth-Party Logistics Providers
•Contract, Risk Sharing, and Supply Chain
performance
•The procurement process
•Risk Management in Sourcing
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The role of sourcing in a supply chain
• Sourcing is the entire set of business
processes required to purchase goods and
services.
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In-house or outsource
How do 3rd parties increase the supply chain
surplus?
1. Capacity aggregation
2. Inventory aggregation
3. Transportation aggregation by transportation
intermediaries
4. Transportation aggregation by storage
intermediaries
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5. Warehouse aggregation
6. Procurement aggregation
7. Information aggregation
8. Receivable aggregation
9. Relationship aggregation
10.Lower costs and higher quality
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Risk of Using a 3rd Party
1.
2.
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The process is broken
Underestimation of the cost of coordination
Reduced customer/supplier contract
Loss of internal capability and growth in 3rd –
party power
Leakage of sensitive data and information
Ineffective contracts
Loss of supply chain visibility
Negative reputational impact
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Third- and Fourth-Party Logistics Providers
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Contract, Risk Sharing, and Supply
Chain performance
Three contracts that increase overall profits by
making the supplier share some of the buyer’s
demand uncertainty are:
1. Buyback or returns contracts
2. Revenue-sharing contracts
3. Quantity flexibility contracts
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The procurement process
There are two main categories of purchased
goods: direct and indirect materials.
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Risk Management in Sourcing
Supply chains with single source is dangerous
(refer to tsunami cases). Disruption risk can be
mitigated by developing multiple sources.
Carrying inventory or developing a backup
source that is more responsive can mitigate
delays from a supply source.
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