Ocupación de la madre

A revised DFD diagram for the organisation’s improvement strategy based on IRP can be found in Figure 4.8. With this new process, the warehouse monitors daily each product’s inventory levels and usage levels at all clinics. By gaining accurate information and integrating the inventory and transportation management, the wholesaler as a central decision maker, is able to made a good decision regarding the time o f delivery, the optimal quantity o f delivery for each clinic and the efficient replenishment route that minimises the inventory and transportation cost.

The visibility and transparency o f the product and demand information helps the wholesaler to identify priority despatches and make a good replenishment. This will help reduce urgent replenishments between the normal replenishment and better utilise the transportation capacity. With customer demand and inventory level information, the warehouse can observe the potential need for a particular product at each clinic and ensure that the inventory at the wholesaler is used to replenish the clinics with the lowest inventory levels. This should overcome customer service

issues arising from the wholesaler being out o f stock. Thus, the customer service level can be improved by having the right product in stock whenever it is needed.

The wholesaler has more flexibility to plan the replenishment strategy so as to minimise the cost and maximise the vehicle utilisation. It is more practical for the wholesaler to coordinate deliveries to the different clinics that are close to each other during the replenishment time. This approach will overcome the problem o f emergency delivery, since an early delivery is made to other clinics that have been integrated to the delivery. However, this approach has the tendency to increase the holding cost at clinics. Thus, an appropriate decision in terms o f the optimal delivery time and clinic situation that need to be integrated during the delivery activity has to be made to ensure a low total operating cost.

Update Wholesaler Inventory Delivery details Delivery Order Copy ofDO Transportation Replenishment Planning Packaging •3 18

II

Sales Pattern Buying

~ e

IS

3 i DO & product

Verify and Sign DO

Payment Delivery status Product Receiving Delivery Id Product, Quantity Clinic 2 Inventory Update Inventory Update Customer

Id clinic, Id Product, product level Idclinic^IdProductjQuantity

Figure 4.8: “To-be” DFD diagram of the inventory replenishment in the case study organisation

As has been discussed in Chapter 2, the integration approach that coordinates activities amongst other clinics when certain inventory levels are reached based on (s,c,S) policy is a possible improvement strategy. Here, the cost reduction comes from the opportunity that the supplier obtains from delivering certain amounts o f products before the clinics reach the actual reorder point.

Holmstrom (1997) notes that VMI implementation can be achieved through robust process design and collaboration. However, effective systems can improve the success of VMI implementation (Kim, 2005). An issue in the context o f this particular supply chain is the use o f different systems for POs and DOs. Consequently, it is difficult to ensure accuracy between the PO and DO systems, with errors in data entry occurring. In addition, the wholesaler has limited visibility o f usage or inventory at the clinics. Therefore, some investment in ICT may be needed before the new supply chain approach can be implemented. The organisation has access and currently utilises the Internet to undertake data transfer between wholesaler and clinics. Therefore, it is believed that no constraints exist in term o f infrastructure to implement the centralised IRP approach. With some improvement to the company’s existing supply chain systems, it is possible for the wholesaler to get real time data from all branches. However, to automate the process and get an optimal decision on the replenishment schedule and the transportation, they have to make a more significant investment by acquiring inventory control and routing software. The behaviour and effect o f the IRP flexibility model on the total cost via simulation will be investigated in the next chapter.

4.6 Conclusion

The case study has shown that the organisation under study is still implementing the traditional supply chain policy where each clinic needs to place an order with the wholesaler twice a month. The analysis o f comparison between the ordering and the actual delivered quantity from organisation’s Purchase Order and Delivery Order data has shown that the organisation is suffering with poor supply chain performance. About 28 percent o f the orders cannot be delivered as required, and about 31 to 38 percent o f orders placed from clinics are categorised as urgent orders that require

and low availability o f products at the wholesaler needed to fulfil the high volume o f orders. Thus, a centralised control system via the VMI approach is the best improvement strategy for the organisation to overcome the stated problems. Furthermore, the wholesaler is able to determine the optimal time and the quantity o f replenishment and thereby minimise the total operating cost by implementing the approach-underlying the VMI strategy known as IRP strategy. The impact o f implementing the early coordination strategy on the total cost will be observed in the next chapter. The IRP model developed for the simulation is a simplified model o f the supply chain process that contains only 1 wholesaler called the supplier and 3 clinics known as retailers. The assumptions, parameters and the objective function o f this model are described explicitly in the next chapter.

Chapter 5 The Stochastic Periodic “Can Deliver”