Optimizing Part Sourcing Strategies for Low-Volume, Long Life Cycle Products Using Second Sourcing and Part Hoarding

2013 ◽  
Author(s):  
Varun J. Prabhakar ◽  
Hannah Allison ◽  
Peter Sandborn ◽  
Bo Eriksson
Keyword(s):  
Supply Chain ◽  
Life Cycle ◽  
Mitigation Strategies ◽  
Supply Chain Disruptions ◽  
Sourcing Strategies ◽  
Study Results ◽  
Future Time Period ◽  
Long Life ◽  
The Impact

Long life cycle products, commonly found in aviation, medical and critical infrastructure applications, are often fielded and supported for long periods of time (20 years or more). The manufacture and support of long life cycle products rely on the availability of suitable parts, which over long periods of time, leaves the parts susceptible to supply chain disruptions such as suppliers exiting the market, allocation issues, counterfeit part risks, and part obsolescence. Proactive mitigation strategies exist that can reduce the impact of supply chain disruptions. One solution to mitigating the supply chain risk is the strategic formulation of part sourcing strategies (optimally selecting one or more suppliers from which to purchase parts over the life of the part’s use within a product or organization). Strategic sourcing offers a way of avoiding the risk of part unavailability (and its associated penalties), but at the expense of qualification and support costs for multiple suppliers. An alternative disruption mitigation strategy is hoarding. Hoarding involves stocking enough parts in inventory to satisfy the forecasted part demand (for both manufacturing and maintenance requirements) of a fixed future time period. This excess inventory provides a buffer that reduces the effect of supply chain disruptions on the part total cost of ownership (TCO), but increases the total holding cost. This paper presents a method of performing tradeoff analyses and identifying the optimal combination of second sourcing and hoarding for a specific part and product scenario. A case study was performed to examine the effects of hoarding on both single and second sourced parts. The case study results show that hoarding can contribute to a decrease in the cumulative TCO and a decrease in its variance.

A Model for Making Part Sourcing Decisions for Long Life Cycle Products

2011 ◽  
Author(s):  
Varun J. Prabhakar ◽  
Peter Sandborn
Keyword(s):  
Supply Chain ◽  
Life Cycle ◽  
Life Cycle Cost ◽  
Critical Infrastructure ◽  
Cost Effective ◽  
Sourcing Strategies ◽  
Support Costs ◽  
Long Life ◽  
Sourcing Decisions ◽  
Linear Regulators

Long life cycle products, commonly found in aviation, medical and critical infrastructure applications, are often fielded and supported for long periods of time (20 years or more). The manufacture and support of long life cycle products rely on the availability of suitable parts, which over long periods of time, leaves the parts susceptible to a number of possible supply chain disruptions such as suppliers exiting the market, counterfeit part risks, and part obsolescence. One solution to mitigating the supply chain risk is the strategic formulation of suitable part sourcing strategies (optimally selecting one or more suppliers from which to purchase parts over the life of the part’s use within a product or within an organization). Strategic sourcing offers one way of avoiding the risk of part unavailability (and its associated penalties), but at the possible expense of qualification and support costs for multiple suppliers. Existing methods used to study part sourcing decisions are procurement-centric where cost tradeoffs focus on part pricing, negotiation practices and purchase volumes. These studies are commonplace in strategic parts management for short life cycle products; however, conventional procurement-centric approaches offer only a limited view when assessing parts used in long life cycle products. Procurement-driven decision-making provides little to no insight into the accumulation of life cycle cost (attributed to the adoption and use of the part), which can be significantly larger than procurement costs in long life cycle products. This paper presents a new life cycle modeling approach to quantify risk that enables cost effective part sourcing strategies. The method quantifies obsolescence risk as “annual expected total cost of ownership (TCO) per part site” modeled by estimating the likelihood of obsolescence and using that likelihood to determine the TCO allowing sourcing strategies to be compared on a life cycle cost basis. The method is demonstrated for electronic parts in an example case study of linear regulators and shows that when procurement and inventory costs are small contributions to the part’s TCO, the cost of qualifying and supporting a second source outweighs the benefits of extending the part’s effective procurement life.

On the Applicability of Analytical Supply Chain Disruption Models for Selecting the Optimum Contingency Strategies for Electronic Supply Chain Disruption Management: A Comparison With Simulation

2014 ◽  
Author(s):  
Hannah Allison ◽  
Peter Sandborn ◽  
Bo Eriksson
Keyword(s):  
Supply Chain ◽  
Mitigation Strategy ◽  
Mitigation Strategies ◽  
Analytical Models ◽  
Supply Chain Disruption ◽  
Simulation Based ◽  
Disruption Mitigation ◽  
The Impact ◽  
Selection Of

Due to the nature of the manufacturing and support activities associated with long life cycle products, the parts that products required need to be dependably and consistently available. However, the parts that comprise long lifetime products are susceptible to a variety of supply chain disruptions. In order to minimize the impact of these unavoidable disruptions to production, manufacturers can implement proactive mitigation strategies. Two mitigation strategies in particular have been proven to decrease the penalty costs associated with disruptions: second sourcing and buffering. Second sourcing involves selecting two distinct suppliers from which to purchase parts over the life of the part’s use within a product or organization. Second sourcing reduces the probability of part unavailability (and its associated penalties), but at the expense of qualification and support costs for multiple suppliers. An alternative disruption mitigation strategy is buffering (also referred to as hoarding). Buffering involves stocking enough parts in inventory to satisfy the forecasted part demand (for both manufacturing and maintenance requirements) for a fixed future time period so as to offset the impact of disruptions. Careful selection of the mitigation strategy (second sourcing, buffering, or a combination of the two) is key, as it can dramatically impact a part’s total cost of ownership. This paper studies the effectiveness of traditional analytical models compared to a simulation-based approach for the selection of an optimal disruption mitigation strategy. A verification case study was performed to check the accuracy and applicability of the simulation-based model. The case study results show that the simulation model is capable of replicating results from operations research models, and overcomes significant scenario restrictions that limit the usefulness of analytical models as decision-making tools. Four assumptions, in particular, severely limit the realism of most analytical models but do not constrain the simulation-based model. These limiting assumptions are: 1) no fixed costs associated with part orders, 2) infinite-horizon, 3) perfectly reliable backup supplier, and 4) disruptions lasting full ordering periods (as opposed to fractional periods).

Supply chains and COVID-19: impacts, countermeasures and post-COVID-19 era

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Atif Saleem Butt
Keyword(s):  
Supply Chain ◽  
Structured Interviews ◽  
Senior Managers ◽  
Supply Chain Disruptions ◽  
Case Study Methodology ◽  
Content Type ◽  
Study Methodology ◽  
The Impact ◽  
Opening Up

PurposeThis paper explores the steps/countermeasures taken by firms to address supply chain disruptions in the wake of COVID-19.Design/methodology/approachThis study employs a case study methodology and employs 46 semi-structured interviews with senior managers of the three buying firms, four distribution centres and four supplying firms based in four countries (Pakistan, Sri Lanka, China and India).FindingsResults reveal that manufacturers are refining production schedules to meet the production challenges. Distributors are working with secondary suppliers to meet the inventory shortage. Finally, supplying firms are evaluating the impact of demand, focusing on short-term demand-supply strategy, preparing for channel shifts, opening up additional channels of communication with key customers, understanding immediate customer’s demand and priorities and finally becoming more agile.Research limitations/implicationsThere are some limitations to this study. First, the results of this study cannot be generalized to a wider population. Second, this study explores the interpretations of senior managers based in four Asian countries only.Practical implicationsSupply chain firms can use these findings to understand how COVID-19 is affecting firms. Firms can also use the suggestions provided in this study to mitigate the impact of COVID-19 and make the best out of this pandemic.Originality/valueThis study contributes to the supply chain disruption literature by exploring the robust countermeasure taken by supply chain firms amid COVID-19 outbreak. In particular, it explores such countermeasures from the perspective of three different entities (buyer, supplier and distributor) based in four different countries in the South Asian region.

Mitigating supply chain disruptions – a normal accident perspective

2014 ◽  
Vol 19 (2) ◽  
pp. 142-152 ◽  
Author(s):  
Kathryn A. Marley ◽  
Peter T. Ward ◽  
James A. Hill
Keyword(s):  
Supply Chain ◽  
Theoretical Basis ◽  
Design Methodology ◽  
Mitigation Strategies ◽  
Management Approach ◽  
Processing Plant ◽  
Supply Chain Disruptions ◽  
Content Type ◽  
Steel Processing ◽  
The Impact

Purpose – Existing supply chain literature provides examples of countermeasures that firms can adopt to mitigate abnormal or catastrophic supply chain disruptions. However, none address reducing interactive complexity prior to adopting countermeasures to mitigate everyday or normal supply chain disruptions. Most mitigation strategies focus on adding capabilities or resources to protect an organization. Here, the authors aim to consider an alternative strategy of examining current processes to determine whether processes can be simplified by using the normal accident theory and its constructs of interactive complexity and coupling as a theoretical basis. Design/methodology/approach – The authors develop a model based on the normal accident theory and use logistic regression to test their propositions in the context of a steel processing plant and its customers. Findings – The findings show the importance of reducing interactive complexity to mitigate supply chain disruptions. However, high inventory is not considered a significant countermeasure, and high inventory levels may increase the likelihood of causing a disruption downstream. These findings support the lean management approach of operating under low inventory levels while eliminating complexity to make problems more visible, causing fewer disruptions. Originality/value – While others have examined the impact of mitigation strategies conceptually, no study has captured information from actual supply chain disruptions to assess how interactive complexity and inventory levels affect disruption potential at downstream customers' facilities. Capturing information from supply chain disruptions enables managers to assess the situation as the disruption is occurring. The authors suggest a strategy in which countermeasures that increase slack in the system should be considered only after the system is sufficiently simplified to mitigate disruptions.

scholarly journals Biofuel supply chain risk mitigation strategy framework: Expert interview based Approach

2020 ◽  
Vol 13 (1) ◽  
pp. 179
Author(s):  
Tedy Wachyudi ◽  
Arief Daryanto ◽  
Machfud Machfud ◽  
Yandra Arkeman
Keyword(s):  
Supply Chain ◽  
Risk Mitigation ◽  
Business Practice ◽  
Mitigation Strategies ◽  
Security Framework ◽  
Supply Chain Risk ◽  
Expert Interview ◽  
Risk Mitigation Strategies ◽  
The Impact

Purpose: The purpose of this case study is to develop and framework supply chain characteristics and risk mitigation strategies in the context of biodiesel downstream supply chain.Design/methodology/approach: This study employs an expert interview-based approach as a qualitative approach with a multi-perspectives view.Findings: There are vary strategies among perspectives, such as perspectives of organization and business types, stakeholder types, times and methods. These also shows that business strategy of collaborative, coordinative, and cooperative arise as alternative strategies for each perspective and each level of stakeholder. Those business strategies may apply in a vary operation strategies which linking through an energy security framework element as company’s competitive priorities.Research limitations/implications: The research scope includes only a certain area of the country’s territory and the target company’s supply chain areas of activity. The research method includes only internal stakeholders and experts as respondents and data sources. The level of analysis was only at corporate level in the corporate case study context. The research also targets only a downstream activities of biodiesel supply chain context. The interview-based approach as a qualitative approach faces some subjectivity challenges among respondents.Practical implications: The research result provides some positive implications for business practice, includes how to minimize the impact of supply chain risk on company’s business activities and performance, how supply chain experts and practitioners used risk mitigation practices, how to formulate strategic plans to minimize the impact of supply chain risk and enhance the effectivity and sustainability of the supply chain activities.Social implications: The implication for business practice was that company’s leaders implemented supply chain risk mitigation strategies that provide positive impacts on the more valuable relationship among supply chain actors and stakeholders.Originality/value: The first, is an activities areas and operation schemes-based of biodiesel supply chain point of view. The second, is a multi-perspectives-based biodiesel supply chain characteristics framework. The third, is an energy security framework-based biodiesel risk mitigation strategies framework.

scholarly journals Supply Chain Disruptions Due to Pandemic- A Case Study Paper on the Recent Pandemic Covid 19

2020 ◽  
Vol 5 (7) ◽  
pp. 1416-1421
Author(s):  
Archana M S ◽  
Kavya C ◽  
Prathiksha B
Keyword(s):  
Supply Chain ◽  
Supply Chain Management ◽  
Supply Chains ◽  
Future Research ◽  
Shipping Industry ◽  
Supply Chain System ◽  
Supply Chain Disruptions ◽  
Chain Management ◽  
The Impact

Be it agriculture, manufacturing or production of energy, all are a part of supply and demand mechanics controlling freights and container ships, bringing the world’s industry together leading to globalization of economy. The world’s food, products were transported by the shipping industry with supply chain as its core. 94% of the Fortune 500 companies are seeing covid 19 supply chain disruptions as per 2020 Forbes report. Supply chains of today are very intricate and interconnected; disruption at one part can spread in an unpredicted manner. This paper helps the reader analyze various supply chain models and the impact of disruptions caused by the pandemic. At first, it discusses supply chain management and its risks due to pandemics. It then, discusses a case study of Unilever restructuring its supply chain system. The paper also suggests a methodology for supply chain management during pandemic. The outcomes and insights of this paper can be used by decision makers for risk management in supply chains and leads a step for future research.

The Impact of Outsourcing on Inbound Logistics Flows

2001 ◽  
Vol 12 (1) ◽  
pp. 21-35 ◽  
Author(s):  
Göran Svensson
Keyword(s):  
Supply Chain ◽  
Automotive Industry ◽  
Quantitative Methods ◽  
Two Phase ◽  
Supply Chain Disruptions ◽  
Methodological Triangulation ◽  
The Impact ◽  
Phase Process ◽  
Inbound Logistics

This research explores the linkage between firms' outsourcing activities and the occurrence of supply chain disruptions. It is based upon a two‐phase process utilizing methodological triangulation. Phase one applies qualitative methods that explore the overall environment of outsourcing and disruptions in supply chains in the automotive industry based upon a case study of a Swedish car manufacturer. Phase two applies quantitative methods to test the findings from phase one in a wider context in the automotive industry. The results indicate that there is a significant association between the outsourcing of internal activities and the occurrence of disruptions in firms' inbound logistics flows from subcontractors.

scholarly journals Port-related conflict at port of Gothenburg – consequences from a fashion retailer’s perspective

2020 ◽  
Vol 5 (1) ◽  
Author(s):  
Erica Lindroth ◽  
Hà Huong ◽  
Rickard Bergqvist
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
Life Cycles ◽  
Mitigation Strategies ◽  
Supply Chain Risk Management ◽  
Supply Chain Risk ◽  
Supply Chain Disruptions ◽  
Negative Effect ◽  
Short Product

AbstractPrevious research have distinguished the risks of supply chain disruptions and the negative effect of supply chain disruption on operational performance in terms of sales, costs and inventory. However, few researchers have studied supply chain risk management and strategies in relation to port conflicts. The 2016 port conflict at a major logistics port in Scandinavia, the Port of Gothenburg, posed an opportunity to study risk management and strategies in the context of major port disruptions, in this case, a labour conflict. The fashion retail industry was affected especially hard due to the short product life cycles and this paper, by means of case study method and analysis, investigates five cases in order to understand how they were affected and what mitigation strategies was used. Results illustrates that during the port conflict, the percentage of increase in logistics cost ranged between 15% and 70%, greatly affected by what mitigation strategy was used by the case company.

Exploring vulnerability and resilience of shipping for coastal communities during disruptions: findings from a case study of Vancouver Island in Canada

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samsul Islam ◽  
Floris Goerlandt ◽  
Mohammad Jasim Uddin ◽  
Yangyan Shi ◽  
Noorul Shaiful Fitri Abdul Rahman
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Disaster Preparedness ◽  
Service Providers ◽  
Vancouver Island ◽  
Coastal Communities ◽  
Mitigation Strategies ◽  
Content Type ◽  
The Impact

PurposeThis study aims to improve understanding of how coastal maritime transport system of Vancouver Island would be disrupted in disaster events, and the strategies could be used to address such risks. Any transport disruption at the maritime leg of the supply chain can affect the needs of vulnerable residents and thus, the supply of many goods to coastal communities.Design/methodology/approachThis case study focuses on the disruption that can be expected to occur for ferries that serves coastal communities of Vancouver Island in Canada. A landslide scenario in the Fraser River (which connects coastal communities) is developed, and interviews and focus groups are used to gain understanding of the vulnerability and resilience of shipping.FindingsThe findings show that the maritime leg of the supply chain for the coastal communities of Vancouver Island is resilient to a landslide disruption of ferries. Besides, there would be no impact on the operability of tugs and barges. This study also offers suggestions for creating the conditions for increasing resilience of maritime supply chains to any such disruption.Research limitations/implicationsA research gap exists with respect to minimizing disruption in maritime supply chains, mainly in regard to lessening the impact on the vulnerable residents of coastal communities. This study contributes to filling this gap in the literature.Practical implicationsThe findings have significant implications for maritime service providers and for people working on disaster preparedness, emergency response and recovery.Originality/valueStudies which focus on alleviating the impact of disruptions in the maritime supply chains and the mitigation strategies for coastal communities are scarce in the literature.

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