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Trainer Scenarios

The goal is to find the best combination of minimum and maximum cycle length and the appropriate Inventory Replenishment Level for a given level of demand variability. In this way, the supply chain can be operated with minimum fluctuations in resource utilization and minimum inventory levels.

The following four scenarios serve as a guideline to understand the interactions which have to be considered when optimizing the supply chain. Those scenarios can be repeated with different settings of demand variability.

1. Status quo

The status quo in the supply chain is a 100% service level for the three finished products. However, the service level is only achieved with very high inventory levels as the IRL is set to the possible maximum. Resource utilization fluctuates widely, because the minimum and maximum cycle length boundaries are very far apart, such that all variability is buffered on the production asset. In a roundtable improvement discussion with the CFO, the supply chain manager is asked to reduce inventory levels but to maintain the high service level.

view presettings of scenario 1

2. Happy supply chain manager

The supply chain manager now reduces the Inventory Replenishment Levels, such that the supply chain still provides a 100% service level. He fulfills the pursued goal of reducing inventories. But the asset manager is still dissatisfied, since the whole demand variability is buffered on his asset. This leads to high fluctuations in resource utilization and subsequently to less efficiency in operations.

view presettings of scenario 2

3. Happy asset manager

The asset manager is happy when he accomplishes high and stable capacity utilization. He sets the minimum and maximum cycle length boundaries to the same value, such that he achieves a stable cycle length. The asset manager is now happy because all variability is buffered in inventories and not on his asset. But due to missing flexibility in the production quantities, the customer service level drops, which in turn leaves the supply chain manager dissatisfied.

view presettings of scenario 3

4. End-to-end supply chain coordination

In the last scenario, both the supply chain manager and the asset manager come to talk with each other. They realize that the best supply chain performance can be achieved when they jointly coordinate their efforts. The asset manager agrees to allow a certain degree of capacity fluctuation on his production asset while the supply chain manager approves to buffer part of the demand variability in inventories. In this way, supply chain performance is maximized.

view presettings of scenario 4