Trade-Off Between Service and Inventory Costs Essay

20409 Words Jun 8th, 2012 82 Pages
Trade-off between service and inventory costs
Rationalizing safety stock settings within NXP Semiconductors by M.W.H. Roeloffzen

Trade-off between service and inventory costs
Rationalizing safety stock settings within NXP Semiconductors

Graduation Company: NXP Semiconductors SCM Competence Center High Tech Campus – 60 (5.50) Professor Holstlaan 4 P.O. Box 80073 5600 K.A. Eindhoven The Netherlands University Supervisors: Dr. Ir. Leo van der Wegen (UT) Prof. Dr. Ir. Ton de Kok (TU/e) (Dr. Ir. Matthieu van der Heijden (UT)) Company Supervisors: Ir. Sander Kok Ir. Ruud Driesen Ir. Erik van Wachem

University of Twente, Enschede Industrial Engineering and Management Science Specialization: Production and Logistic Management Mark W.H.
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Hence there is a need to: 1. Support planners in deciding where to place the customer order decoupling point and how much safety stock to keep in all the available stock points in order to support NXP’s business in the most effective way. 2. Consider an integral supply chain network for safety stock optimizing instead of optimizing local stock points. 3. Perform a sensitivity analysis on the relation between the (safety) stock settings (translated into costs) and the delivery performance (service) is needed. Based on these three objectives, in combination with the decision that an off-the-shelf model (SCOpE) will be used for optimizing safety stock settings, the central question can be formulated as follows: Can SCOpE be used for defining the optimal safety stock settings over the network in reference of customer order behavior and preferences and what are the implications of doing so? Model testing and improvements made To find out whether SCOpE can be used in practice, six representative case studies within BL MMSPM are validated by running the model under the same conditions as the real world system followed by a comparison of the model outcomes (i.e. perceived service) with the actual perceived service (i.e. RLIP%). The month under analysis is May 2007 and the results are as follows: Eleven root causes were identified for differences, of which:

Trade-off between service and inventory costs


Four root causes were linked to the current processes or

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