The impact of operations redesign on the safety stock investment in supply chains |
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Authors: | Xiaohang Yue |
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Affiliation: | (1) Sheldon B. Lubar School of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA |
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Abstract: | This study is motivated by a real problem encountered in the manufacturing and distribution process at a local electronic
manufacturer of security devices. We investigate the impact of operations redesign (i.e., operations merging) on the cost
of safety stock in a supply chain. A simple safety stock method is used to derive a model for estimating safety stock levels.
Our result shows that operations redesign can have a significant impact on safety stock investment. We extend and complement
the existing literature in the following aspects: (i) we address the issue of safety stock deployment, i.e., we not only investigate
the problem of how many operations should be delayed, but also determine which operations need to be delayed, (ii) we provide
an efficient heuristic algorithm to determine which operations need to be merged, and (iii) we find the optimal operations
redesign strategies under some special cases. Our analysis also reveals some important conditions and insights for better
operations redesign, which enable us not only to decide when an operations redesign is appropriate, but also to suggest the
scale and the format of the operations redesign.
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Keywords: | Operations redesign Manufacturing process Safety stock Cost benefit |
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