LECTURE 7 ( ): FREIGHT - MIT OpenCourseWare

[Pages:89]1.221J/11.527J/ESD.201J Transportation Systems Fall 2004

LECTURE 7 (and forward): FREIGHT

DISPLAYS

SPEAKER: Joseph M. Sussman MIT

B

Another Production

Process

54 3 2

1

40 containers/day

A

Assembly Plant

2

INVENTORY AT B

40 Containers/day are "consumed" at B

Inventory at B

40

0

1

2

3 Time (Days)

3

PIPELINE INVENTORY

Inventory

200

1

2

3

4

Time

4

WHAT CAN GO WRONG?

Delays along the way -- service reliability

Inventory at B

80

40

1

2

3

Time

goods don't arrive

ISSUE: Stock-outs

5

WHAT CAN GO WRONG?

(CONTINUED)

So, perhaps the customer at B keeps a day's worth of inventory

Inventory

80

1

2

3

4 Time (days)

Problems: Bigger Inventory Warehousing Costs Insurance Costs

6

A BIG ISSUE -- STOCK-OUTS

WHAT DOES A STOCK-OUT COST?

Examples

GM Assembly Plant Retail Store Blood Bank

7

Another approach: Order less often -- only every 5th day

Inventory at B

200

5

Time

Average Inventory at B = 100, rather than 20

8

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