Supply Chain Inventory Policy Analyser (SCIPA) Software … manual-Supply chain... · National...

Supply Chain Inventory Policy Analyser (SCIPA) Software Package -User

Manual

Department of Mechanical Engineering

National Institute of Technology Calicut

The document giving details about how to use the Supply Chain Inventory Policy Analysis Software

Supply Chain Inventory Policy Analyser (SCIPA) Software Package -User Manual

MED, NIT Calicut, May 2014

CONTENTS

1. Introduction 3

2. SC structures 3

3. Inventory policies 4

4. Rationing rules 5

5. Performance measures 6

6. Assumptions 7

7. Formula for order policy determination 7

8. How to use 9

9. Performance specifications of the software 13

10. Design and implementation constraints 13

11. Errors and solution 14

12. Safety and security requirements 14

13. Frequently asked questions 15



1. INTRODUCTION

This software package helps to analyze the performance of different Supply Chain (SC) structures

under various inventory policies and rationing policies. The document will provide users with the

knowledge of how to change certain properties and make the software adaptable to their demands.

This will also throw some light into educating them about the usage of the software.

2. SUPPLY CHAIN STRUCTURES

This software can be used to analyse eight different supply chain models (structures). All the

supply chain models consist of four echelons (i.e. retailer, wholesaler, distributor, and

factory). The SC model differentiation is based on the number of members present in the each

echelon. The following figures show the different supply chain structures.

1

2

3

4

5

6

7

8

Fig. 1: Different SC models



3. INVENTORY POLICIES

Seven different inventory policies are available to judge the performance of a serial and

divergent SC system. User will be able to compare the results of the different policies on a

same supply chain structure through detailed transactions showed on excel sheets and

graphical data. The details of each policy are given below:

3.1 Order Up to Level (OUL) policy

In this policy, an order is placed at each review period so that the sum of the inventory

position (IP) and the order placed in that period must be equal to the maximum inventory

level (order up-to level), S . Maximum inventory level is the demand planned for some time

periods, which includes time between reviews, the number of time periods required for the

order to reach the upstream echelon (In the case of factory, this is the time required to issue

the production order.) and the number of time periods required for the shipment quantity to

reach the downstream echelon. (In the case of factory, it is the time required to manufacture

the goods.).

3.2 Modified Order Up to Level (MOUL) policy

In this policy, inventory position at each review period is calculated and an order is placed if

the inventory position is less than order up-to level, if the difference between order up-to level

and inventory position is greater than expected demand during review period (EDR) then the

size of order placed is equal to order up-to level minus inventory position, otherwise the size

of order placed is equal to expected demand during review period (EDR).

3.3 (r, S) policy

In this policy, inventory position at each review period is calculated and an order is placed if

the inventory position is less than or equal to the reorder point, r, which is equal to equal

to the average demand during lead time , the size of the order placed is equal to the order up-

to level, S, minus inventory position.

3.4 (r, Q) policy

In this policy, if the inventory position at review period is less than or equal to reorder point,

r, an order is placed which is a fixed size of Q units. The size of order placed is equal

to the average requirement per period.

Under ‘Information sharing’ status, mean customer demand is considered as fixed order size

(Q) . Under ‘No information sharing’ status, for the first year forecasted value is considered as



fixed order size. From the next year onwards average of customer orders for the previous year

is considered as the order size.

3.5 Demand Flow Strategy (DFS)

In this policy, at each review period an order is placed and is equal to previous period

customer demand. The same customer demand is transferred to the next stage but it is

delayed by order lead time.

3. 6 Fixed Order Quantity (FOQ) policy

In this policy, a fixed size of the order is placed at each review period and its size is equal to

the average demand per period.

Under ‘Information sharing’ status, mean customer demand is considered as fixed order size

(Q). Under ‘No information sharing’ status, for the first year forecasted value is considered as

fixed order size. From the next year onwards average of customer orders for the previous year

is considered as the order size.

3.7 Average Demand Strategy (ADS)

In this policy, the size of the order is equal to the average demand of the 52 previous periods.

If the number of previous periods is not equal to 52, then it is equal to average value of

demand of the available previous period(s). From 53rd

period onwards rolling average of

previous 52 periods of customer orders are taken into consideration.

4. RATIONING RULES

If sufficient inventory is not available, a member in the upper echelon will follow some rules

to ration the available inventory among the associated immediate downstream members in the

lower echelon. The developed software can be used to analyse four rationing rules.

4.1 Proportional Allocation Rule (PAR)

Retailer’s order is satisfied according to the proportion of their individual order size to the

total order quantity. The distributor allocates its inventory to retailers according to the

proportion, with the amount being truncated to its nearest lower integer. If there are n

remainder items (residual), randomly choose n retailers from those who have placed orders,

and then allocate one unit of goods to each of them.

4.2 Batch size Allocation Rule (BAR)



Retailer’s order is satisfied according to their batch sizes, from the largest to the smallest

(maxBAR) or from the smallest to the largest (minBAR). If more than one retailer ordered

the same quantity (a tie), the distributor satisfies them according to their sequence in entity

numbers.

4.3 Default Ranking Rule (DRR)

Rank will be allotted to each retailer according to their sequence in entity numbers and the

orders are satisfied in the descending order of rank. This rule is not realistic; because certain

retailers will always preferring over others in a SC and it will result in other retailers demand

get unsatisfied all the time.

5. PERFORMANCE MEASURES

5.1 Fill Rate (FR)

It is defined as a fraction of demand met from the shelf in the lost sale environment. The

average of FRs of all the retailers is considered as supply chain FR.

5.2 Ratio of order variance of echelon i (Φi)

As moving from downstream echelon to upstream echelon, the amplification of order

variance shows the presence of BWE in supply chains. All the customer demands are

assumed to be independent and that each member places orders independently, the aggregate

variance in each echelon i is the sum of the variances of orders of each member j in the

echelon i. The formula for Φi is given below:

C

Cj

i

ji

n

j

O

n

j

O

i

s

s

1

2

1

2

,

2

, jiOs - Variances of orders of each member j in echelon i

2

CjOs - Variances of orders placed by customer

5.3 Bullwhip slope (BwSl)

Φ gives a measure of increase in order variance between a specific echelon i and customers

and it is not a representative of entire chain. BwSl is an entire supply chain measure showing

the presents of BWE. A high value of the slope means a fast propagation of the BWE through



the supply chain, while a low value means a smooth propagation. It is calculated by using the

formula given below:

N

i

N

i

ii

N

i

N

i

i

N

i

iii

ppN

ppN

BwSl

1

2

1

2

1 11

5.4 Total cost of supply chain (TCSC)

Total cost of an echelon is the sum of all costs of all members in the cost computation

periods. Various costs considered are holding cost and shortage cost. Total supply chain

cost is the sum of all cost of all echelons.

6. ASSUMPTIONS

The assumptions taken into account are:

1. Purchase order is placed at the beginning of the period.

2. Each stage receives replenishment order quantity at the beginning of the period.

3. The initial inventory at the start of simulation at each stage will be fixed.

4. Customer order arises at retailer only.

5. There are no capacity constraints and storage space constraints at each stage in the supply

chain.

6. The factory has infinite production capacity and enough raw materials for production.

7. There is no transshipment between retailers, wholesalers and distributors.

7. FORMULA FOR ORDER POLICY DETERMINATION

Notations

AQ – Allocated Quantity

BI – Beginning Inventory

DL – Delivery Lead Time

EI – Ending Inventory

IP – Inventory Position

OL – Order Lead Time

OP – Order Placed



OQ – Order Quantity

OUL – Order Up-to Level

RW – Review Policy

Demand Forecast = Roundup ((Demand t-1 + Demand t-2+…+ Demand t-f)/f)

Where f is forecasting period

Allocated Quantity = IF (BI>OQ, OQ, BI)

OUL = (OL+ DL + RW) * Demand Forecast

Lost sales = OQ – AQ

EI = BI – AQ

BIt = EIt-1 + RQt (where t is the current week)

IPt = (BIt + OP in PERIVIOUS PERIOD)

Order Placed (OUL):

OP = IF (OUL = 0, 0, IF (IP>OUL, 0, OUL-IP))

Order Placed (MOUL):

OP = IF (IP>OUL, 0)

OP = IF ((IP<OUL) and (OUL-IP)>EDR, OUL-IP, EDR)

Order Placed (r, S):

OP = IF (OUL = 0, 0, IF (IP>r, 0, OUL-IP)), where r = Reorder point

Order Placed (r, Q):

OP = IF (OUL = 0, 0, IF (IP>r, 0, Q)), where r = Reorder point and Q=fixed quantity

Average Demand over simulation length = (Total Demand/ Simulation length)

Average order placed by each stage = (Total order placed by each stage /

Number of order placed by each stage)

length simulation n re whe,1

)(

i, stageby placed orders of Variance 1

2

2

i

n

OOn

i

i

t

Inventory held by each stage = Total of end inventory by each stage

Demand met = Total of Allocated Quantity

Fill rate of each stage = (Demand met/Demand arose)



8. HOW TO USE

8.1 Input

A. Fig. 2 shows the first input to enter into the software. As the screenshot (Fig. 2) describes, this

panel takes username and password as input to authenticate the user thus protecting from any

unauthorized use of the software.

Fig.2: Input to authenticate the user

B. The numbers of the members needed in the SC structure are provided along with the business

environment, period nature and information sharing status as in Fig. 3.



Fig. 3: Second input details

Once the members are appropriately chosen which on wrong choice will give errors; the user

can see the supply chain structure of his required choice. The user has the choice to use perform

the simulation based on three different period nature settings-Day, Week and Month. The

information sharing status may be either ‘No sharing’ or ‘Sharing’. Under ‘Sharing’ status the

mean customer demand is known to all the members of the SC.

C. The Fig. 4 takes the details of Forecast-Moving Average for all the members individually

(under ‘No information’ sharing status). The first period demand for respective members is

accepted as input. The user has the liberty to choose the type of customer demand

distribution-Normal or Uniform (where only mean can be of decimal format). Lastly the

respective lead time of each member is taken. If all the details provided are correct to sense

i.e. correct data type and valid numbers, the third input panel is opened or errors are generated

until all the data is entered.



Fig. 4: Third input details

D. On filling the second panel the third panel is opened which takes the following details of

respective members:

a. Inventory Policy (which is same for all the members for that simulation).

b. Review Period, which is restricted to 1.

c. Initial Inventory.

d. Rationing Policy to be used (which is same for wholesaler, distributor and

factory for the simulation).

e. Ordering cost (can be decimal >0).

f. Transport cost (can be decimal >0).

g. Holding cost (can be decimal >0).

h. Shortage cost (can be decimal >0).

i. Length of the simulation (i.e. length of time in days, weeks or months the

simulation should be performed) (>0).

j. Number of Replications (>0).

k. Beginning of Evaluation Period (>0).

l. Ending of Evaluation Period (<=Length of simulation).

On submitting all the above inputs correctly, starts the simulation.

E. The help files are provided to understand the list of inputs to be known before using the

software.



F. The replication progress bar shows the status of the replication going on when the software is

running.

G. The Period progress bar shows the status of the week currently going on when the software is

running.

H. The progress bar at the button shows the status of the whole process that is running in the

background. When the process completes, the progress bar shows 100%.

8.2 Output

The InventoryPolicyAnalysis.xlsx file contains the output where following sheets are produced

dynamically:

1. Retailer’s sheet –One for every retailer specified in the input.

2. Wholesaler’s sheet –One for every wholesaler specified in the input.

3. Distributor’s sheet –One for every distributor specified in the input.

4. One Factory’s sheet.

5. Performance Measure sheet-Shows the calculations for respective members based on the

following :

a. Order variance rate.

b. Ordering cost

c. Transportation cost

d. Holding cost

e. Shortage cost

f. Bull whip slope

g. Total supply chain cost

h. Demand arose

i. Demand met

j. Fill rate

k. Lost sales

l. End period inventory

m. Zero replenish quantity

6. Final Performance Sheet –Display the average of the last replication for the members together

i.e. Retailer, Wholesaler, Distributor and Factory in the top and at the bottom it shows the

average of the members together for all the replications.



7. Replication Sheet-The values mentioned in the Performance sheet respectively for all the

replications are showed here.

The three other sheets are for software’s personal use.

There is a static file as FinalPerformanceMeasures.xlsx file containing the ‘Performance’ sheet, that

accepts value from the Final Performance Sheet and the Graph Sheet(InventoryPolicyAnalysis.xlsx)

and shows the ultimate result of the performance evaluation in a concise manner. This page also

contains the graphs which generates graphs according to the inputs that come from the

InventoryPolicyAnalysis.xlsx file.

9. PERFORMANCE SPECIFICATIONS OF THE SOFTWARE

All the sheets that are created are dynamic.

1. The static sheet showing graphs can be modulated according to the use’s needs.

2. The number of replication can be anything greater than zero.

3. The length of simulation can be anything greater than zero.

4. It will give users a live example of a real supply chain and work as a simulator where they

can test and measure the performance of a four stage supply chain with different

parameters under different inventory policies.

5. These softwares will facilitate users to virtually understand the advantages and

disadvantages of a certain situation of a real life supply chain and the effects it has on the

revenues of a business.

6. It will also be a helping tool for entrepreneurs in branch of demand and supply of goods.

10. DESIGN AND IMPLEMENTATION CONSTRAINTS

The softwares can only be used by authorized personnel only. The software needs current

machine configurations to run the software effectively and efficiently. The software is not

meant for multiuser use. The time taken for the output of a simulation highly depends on the

simulation length and number of replications required by the user. The user may face

machine hang-ups in certain critical conditions when values provided are huge in respect to

the state and configuration of the system. If processing discontinues automatically for

repeated number of times the administrator or the maintenance team should be contacted.



11. ERRORS AND SOLUTION

11.1 Errors

1. If text boxes are not filled the error label shows a warning and accepting inputs

won’t proceed if the text boxes are filled with the correct inputs.

2. In this software, all the text boxes are permitted to take only numeric inputs, so

warning is displayed is case of any input such as alphanumeric or special symbols

or space.

3. Some inputs are permitted to be in form of decimal format e.g. variance and the

different costs(ordering, lost sales, transport and holding).Except these values if

any other text boxes are given decimal values, warning is displayed.

4. In case of combo boxes, if correct values are not chosen, warning is displayed.

5. In case of choosing members, if right combination is chosen for the simulation, a

warning ‘Choose correct combination’ is displayed.

11.2 Solution

1. Null value exception-Check the location on the output file that it is correct.

2. Check that the static files are in its location and empty to accept simulation

results.

3. Simulation not starting-Close all the files linked to the software.

4. Simulation suddenly stops in the middle-Restart the system.

5. Input errors-Check that all the values given as input are numeric, without any

space, and contains no alphanumeric or special characters.

6. Combo box errors-Check that values other than ‘choose’ is chosen, thus declaring

the right parameters needed for the simulation.

12. SAFETY AND SECURITY REQUIREMENTS

The following safety must be followed:

1. If the system crashes the whole process should be restarted.

2. During simulation, patience has to be maintained so as to prevent from system failure.

3. Special care must be taken to abide by the rules and regulations that precede the software

for its maximum output.



4. The software must not be given if the hands of person who have less than minimum

education about the software.

13. FREQUENTLY ASKED QUESTIONS (FAQ’S)

1. How to get registered?

Answer: Collect the username and password from the admin or seller of the software. Enter

your desired username and password. Done! You are registered. Next time onwards use

your personal username and password.

2. What to do if software does not respond correctly?

Answer: Contact the admin.

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