28 January 2013
Within the inventory management area the distance between research and common practice has become greater every year. Erik and Emil have now taken a step to make this distance shorter.
Chart for decision of safety time
The model developed is constructed so that a safety time can be found by plotting it directly in a graph. The data for plotting the information is based on the variation in demand and order frequency. The model has achieved good results in evaluation tests performed during the master thesis.
In their report, Erik and Emil’s main purpose is to evaluate how different methods to determine the safety stock affects tied up capital. Similar to previous studies , they came to the conclusion that the fill rate method (Serv2), which is the method that today's students often learn is superior, generally create a higher level of tied up capital than corresponding time-based methods. The methods that perform best were shortage cost methods. These methods are though rarely used in practical situations because of their theoretical nature.
That time-based parameters were found to perform very well is no news to us at MA-system/PipeChain. Time-based parameters are what we advocate because of their simple, dynamic and adaptable nature. To set the parameters at a level that meets the desired service level has now become much easier. MA-system/PipeChain is at your service when you want to improve inventory parameters.
Contact us to discuss how we can help your business.
SCM consultant, MA System Consulting
+46 46-32 90 09