The impact of "Never Run Out" policy assured supply chain with dual reorder point expediting

Managing a big supply chain for one of the largest quick service restaurant companies, especially when the company has a policy called "Never Run Out," is very challenging. A traditional way of managing inventory requires high level of safety stock if high level of uncertainty is involved. Sources of uncertainty include variability in demand from frequent promotions or seasonal effect, variability in order lead time from using low-cost mode of transportation, or lack of information sharing. This project developed an expediting policy with dual reorder points with demand threshold and tested the policy with a Monte Carlo simulation. Previous research on two reorder points provide great foundation for this study but they lack consideration on demand variability and approaches to set up reorder points. We propose an algorithm with a demand threshold to trigger an expedited order and heuristic approaches to develop reorder points where the total cost can be minimized while service requirements are met.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Lee, Gil Su

Advisor dc:contributor.advisor

• Chris Caplice.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/45230

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/45230