~ 3 ~ Abstract Master Program in Business process and Supply Chain Management Degree Project in Logistics 15 hp, Course 4FE06E Authors: Alexandra Dagberg, Alexander Thorén, Giovanni Tozzi, Kalin Velichkov Tutor: Roger Stokkedal Examiner: Helena Forslund Title: “Minimizing the risk of material shortage and waiting times via an improved order to delivery process – A study conducted within IV Produkt in Växjö” Background: Inventory Management activities have gained a relevant importance over the time in reducing uncertainties at both upstream as well as downstream levels of the supply chain, allowing a smooth material flow between chain members while responsively meeting customer demand. Control activities over the inventory represent a challenged and controversial aspect for most of today’s companies, including IV Produkt. Problem discussion: IV Produkt has, due to the rapid growth during the last ten years, fallen behind the area of inventory management as well as internal material handling process. The reason is that the company has not been able to develop these functions with the same pace as the economic growth. Consequently, the firm is facing difficulties to efficiently supply assembly lines, causing material shortage and waiting times. Research questions: RQ1: - How is the order to delivery process, from material supply functions to the Assembly line 2, at IV Produkt built up today? RQ2: - How can the order to delivery process of raw material and semi-finished products, between material supply functions and the Assembly line 2, be improved in order to minimize the risk of material shortage and waiting times? RQ3: - How can the physical storage of raw material and semi-finished products be structured within the studied area in order to support RQ2? Method: This thesis represents a descriptive case study conducted via a positivistic perspective and a deductive approach. Data was collected by interviews, observations and questionnaires, as well as via academic literature procured via a research in Linnaeus University’s library and via the use of approved web databases. Results are based on quantitative data collected from the studied company, guaranteeing the scientific credibility of the thesis. The respect of ethical principles were ensured by a discussion with company to mutually agree on the confidentiality of the presented information. Conclusion: The conclusion shows how the studied order to delivery process is built up today, highlighting several kind of waste in the current material and information flows. As a result, several actions, such as an extended use of the data system, the application of Kanban and the implementation of the ABC logic, in combination with a new proposed storage layout, were identified and proposed in order to minimize the risk of material shortage and waiting times.

Syfte – Syftet med denna studie är att undersöka hur lagerstyrning av reservdelar inom hjälpmedelsförsörjning kan effektiviseras. Metod och genomförande – Den valda strategin för att uppfylla studiens syfte omfattades av att genomföra en fallstudie i samarbete med Hjälpmedelscentralen på Länssjukhuset Ryhov i Jönköping. Empiri från fallstudien har erhållits genom intervjuer och dokumentationsstudier. Insamlad data har analyserats gentemot det teoretiska ramverket och därmed genererat studiens resultat. Resultat – Studiens resultat visar inledningsvis på att rörlighet, volymvärde och kritiskhet är viktiga aspekter att beakta vid lagerstyrning av reservdelar inom hjälpmedelsförsörjning. Rörlighet och volymvärde har utgjort kriterier för en sortimentsövergripande ABC-klassificering, vilket resulterade i tre segment. Ett av dessa segment, kundorder, har så pass låg rörlighet att det ansågs lämpligt att endast beställa dessa reservdelar då behov uppstår. För de övriga segmenten bör lagerstyrningen utföras med beställningspunktsystem, dock med en viss skillnad när det gäller styrningens intensitet. Vidare anses det lämpligt att, för enskilda reservdelar, göra kvalitativa bedömningar avseende kritiskhet. Detta ska säkerställa att kritiska reservdelar får en mer uppmärksammad styrning för att därmed, i större utsträckning, undvika bristsituationer. Implikationer – I denna studie har det fastställts hur lagerstyrning av reservdelar inom hjälpmedelsförsörjning kan effektiviseras. För verksamheter som vill åstadkomma detta är det dock nödvändigt att identifiera de aspekter som, för verksamheten i fråga, är mest väsentliga. Vidare krävs det att tillgång till nödvändigt dataunderlag säkerställs. Begränsningar – Fallstudiedesignen utgjordes av en enfallsstudie där endast en analysenhet undersöktes. I och med att olika verksamheter har olika förutsättningar för lagerstyrning hade det varit lämpligt att inkludera fler fallverksamheter i undersökningen. Detta hade resulterat i en högre grad av generaliserbarhet. / Purpose – The purpose of this study is to investigate how to achieve efficient inventory management of spare parts in the health care sector. Methodology – To meet the purpose of the study a case study has been conducted in collaboration with Hjälpmedelscentralen at Länssjukhuset Ryhov in Jönköping. The empirical data have been obtained by methods such as interviews and documentation studies. By analysing empirical data in comparison with the theoretical framework the findings of the study was generated. Findings – Initially, the findings of the study implies that aspects such as usage frequency, annual dollar volume and criticality are important to consider in inventory management of spare parts in the health care sector. Usage frequency and annual dollar volume have been used as criteria for an assortment wide ABC-classification which resulted in three segments. One of these segments, customer order, has a very low usage frequency. Therefore it was considered appropriate to only order these spare parts when an actual need has occurred. The inventory management of the remaining segments should be carried out with a reorder point system. However, there is a certain difference regarding the intensity of the management between the two segments. Furthermore, it’s appropriate to conduct a classification based on criticality. This should ensure that critical spare parts get more attention and hence decreasing the risk of shortage. Implications – In this study, it has been determined how to achieve efficient inventory management of spare parts in the health care sector. For those who aim to do this it’s necessary to identify the aspects that are most important for the particular business. Furthermore, it’s important that these businesses ensure the availability of necessary data. Research limitations – The conducted case study was designed as a holistic single case study. Since businesses differ from each other it would have been appropriate to conduct a multiple case study. As a result of this, a higher degree of generalisation could have been achieved.

Bakgrund: E-handel har haft en ständig ökning i Sverige sedan de första företagen startade sina verksamheter. Under de senaste åren har e-handeln visat en betydligt större tillväxttakt än detaljhandeln. Statistik visar att nio av tio konsumenter någon gång har e-handlat vilket tyder på att e-handeln idag är väletablerat bland konsumenterna. En mognare marknad har lett e-handeln in i en ny fas i den konkurrenskraftiga expansionen. Med en expanderad e-handel tillkommer nya utmaningar och problem inom logistik. E-handelsföretag som inte infört nödvändiga logistiksatsningar riskerar att hindras i utvecklingen eller konkurreras ut. Detta innebär att företag inom e-handel måste optimera, förnya och bli mer personliga mot kund för att behålla ett övertag gentemot konkurrenterna. Syfte: Syftet med rapporten är att beskriva inköpsprocessen och lagerhanteringen samt undersöka vilka problem inom inköpsprocessen och lagerhanteringen svenska e-handelsföretag upplevt i samband med e-handelns tillväxt. Metod: Rapporten består av en kvalitativ flerfallstudie. Studien utfördes på fallföretagen NordicFeel, NordicInk, Sporttema, Bubbleroom och GreenTech. Datainsamling har skett genom litteraturstudier, semi-strukturerade intervjuer samt direkta observationer. Slutsats: Svenska e-handelsföretag i studien är små i förhållande till sina leverantörer. Därmed avviker de från van Weeles (2010) inköpsprocess då de inte tillämpar kontraktskrivning och leverantörsuppföljning. Eftersom samtliga fallföretag bedriver försäljning av befintliga varumärken begränsas även deras möjlighet att utfärda specifikationer till leverantörer. Studier av lagerhanteringen uppvisades att samtliga fallföretag utför ankomstkontroll på inkommande gods. Dock levereras godset i- 4 -avvikande förpackningar och på olika pallsystem, vilket medför varierande hantering vid inläggning och plock av produkterna. Avsaknad av kontraktskrivning medför att samtliga företag har svårt att kräva leverantörer på ersättning vid felaktiga leveranser. Felaktiga leveranser härrör från att de är ofullständiga eller innehåller felförpackade produkter. Vid mottagning upptäcker företagen skadade produkter, som rapporteras till inköpsavdelningen. Samtliga företag utnyttjar inte sin lageryta optimalt, vilket leder till försvårad framkomlighet på lagret vid inläggning och plock. / Background: E-commerce has had a constant increase in Sweden since the first companies started their operations. In recent years, e-commerce has shown a significantly higher growth rate than retail. Statistics show that nine out of ten consumers have shopped online, suggesting that e-commerce is well established among consumers. A mature market has led e-commerce in to a new phase of the comtetitive expansion. With an expanded e-commerce however, new logistical challenges and problems emerge. E-commerce companies that have not yet adopted necessary logistics efforts could be hindered in their development or forced to exit the market. This means that companies in e-commerce must optimize, innovate and be more personal with customers in order to maintain an edge over the competition. Purpose: The purpose of this paper is to describe the purchasing process and inventory management and study the problems in the purchasing process and inventory management Swedish e-commerce companies experienced in e-commerce growth. Method: The paper consists of a qualitative multiple case study. The study was performed on the companies NordicFeel, NordicInk, Sporttema, Bubbleroom and GreenTech. Data was obtained from literature reviews, semi-structured interviews and direct observations. Conclusion: Swedish e-commerce companies in the study are small in relation to their suppliers. The companies differ from van Weeles (2010) purchasing process since they do not apply contracts and supplier monitoring. Because the companies engage in sales of existing brands they are also limited in their ability to issue specifications for suppliers. The studies of inventory management demonstrated that the companies perform inspection of incoming goods. However, the delivered goods are received in- 6 -different packaging and different pallet systems, which results in varying handling during insertion and retrieval of the products. The lacks of contracts mean that the companies have difficulty to demand suppliers of compensation due to incorrect deliveries. Incorrect deliveries mean they are incomplete or contain improperly packaged products. Upon receiving damaged products, the companies report to the purchasing department. The companies do not use the warehouse space optimally, leading to a more cumbersome accessibility in the warehouse during loading and picking.

Vendor Managed Inventory (VMI), Consignment Inventory (CI) and a combination of both (C&VMI) are supply-chain sourcing agreements between a vendor and customer. VMI allows the vendor to initiate orders on behalf of the customer. In CI, the customer pays for the goods supplied by the vendor only upon use. The vendor under C&VMI decides customer-replenishments, and owns the goods replenished until they are deployed by the customer. Our thesis studies these agreements in three essays. <br /><br /> The first essay considers a vendor <em>V</em> that manufactures a particular product at a unique location. That item is sold to a single retailer, the customer <em>C</em>. Three cases are treated in detail: Independent decision making (no agreement between the parties); VMI, whereby the supplier <em>V</em> initiates orders on behalf of <em>C</em>; and Central decision making (both Vendor and Customer are controlled by the same corporate entity). <br /><br /> Values of some cost parameters may vary between the three cases, and each case may cause a different actor to be responsible for particular expenses. Under a constant demand rate, optimal solutions are obtained analytically for the customer's order quantity, the vendor's production quantity, hence the parties' individual and total costs in the three cases. Inequalities are obtained to delineate those situations in which VMI is beneficial. <br /><br /> The problem setting in the second essay is the same with that of Essay 1, but the sourcing agreements investigated are now CI and C&VMI. In CI, as in the usual independent-sourcing approach, the customer has authority over the timing and quantity of replenishments. CI seems to favour the customer because, in addition, he pays for the goods only upon use. Under a C&VMI agreement, the vendor still owns the goods at the customer's premises, but at least can determine how much to store there. <br /><br /> The second essay thus contrasts the cases CI and C&VMI, and compares each of them to a no-agreement case. General conditions under which those cases create benefits for the vendor, the customer and the whole chain are determined. <br /><br /> Essay 3 investigates VMI and C&VMI separately for a vendor and multiple customers who face time-varying, but deterministic demand for a single product. In any of those agreements, the vendor seeks the best set of customers to achieve economies of scale. MIP models are developed to find that set of customers, and to determine the vendor's optimal production, transportation, and customer-replenishment quantities. The model for VMI is solved using a heuristic that produces two sub-models, and uses hierarchical solution approach for production, customer-replenishment and transportation decisions. C&VMI model is solved using Lagrangian relaxation. Various numerical examples are used to test the solution approaches used. <br /><br /> In the mean time, the customers can guarantee to be no worse off under VMI or C&VMI than the no-agreement case by setting the right levels of maximum inventory. A model to determine those levels and a solution algorithm are also proposed in Essay 3. <br /><br /> The first two essays can help a vendor or customer in a supply chain to determine the least costly sourcing option, which depends on the relative values of various cost parameters. A vendor with multiple customers can make use of the results in the third essay, which reveal the best possible economies of scale under VMI or C&VMI. Those customers can guarantee to be no worse of than traditional sourcing when they set the proposed levels of maximum inventory.

The companies ought to care about OEE because it is a measure that shows the effect of the performance and quality related losses on the system or equipment. In order to improve OEE, they focus on defining the losses under each OEE elements and try to eliminate these losses.This study aims to enhance raw material inventory management in order to eliminateinventory management related losses and improve OEE.  Lack of raw material and improperstorage of raw material are main problems related to inventory management. A model isdeveloped and tested in order to prevent these problems and eliminate these losses.Performance rate can be improved by preventing idle time due to lack of raw material, andquality rate can be improved by standardization and improving raw material storageprocedure. In the result of model testing, it is shown that raw material inventory managementhas an effect on OEE and OEE can be improved by enhancing raw material inventorymanagement.

Introduction: Nowadays firms must focus on maintaining healthy finished goods inventory stocks in order to be able to decrease inventory costs, meet customer requirements and to obtain competitive advantage. However large decentralized manufacturing companies often face the problem of sub-optimization in inventory management in subsidiaries due to several different reasons. As a result, company loses its competitiveness. Thus, there is a need to coordinate inventory activities of subsidiaries to prevent sub-optimization. Purpose: The purpose of this thesis is to investigate whether coordination mechanisms highlighted in academic literature are used in practice on the example of manufacturing company with decentralized decision-making structure for optimization finished goods inventory stocks. Frame of reference: This research is based on theoretical framework and empirical findings. Empirical data were collected through personal interviews and retrieved from organisational documents. Methodology: The research strategy for this paper is a single case study. This strategy allows investigating topic in its real life context. The deductive approach is used for this research based on qualitative data. The major source of data collection was semi-structured interviews and the company's documents. For analysing data categorisation approach was applied. Conclusion: The study found that most of coordination mechanisms presented in scientific literature are used in practice. To achieve better results these mechanisms should be applied simultaneously and consistently since they complement each other. We also observed that coordination mechanisms indeed give positive results and are able to optimize inventory management.

In many firms the pricing and inventory control functions are separated. However, a number of theoretical models suggest a joint determination of inventory levels and prices, as prices also affect stocking risks. In this work, we address the problem of simultaneously determining a pricing and inventory replenishment strategy under reference price effects. This reference price effect models the empirically well established fact that consumers not only react sensitively to the current price, but also to deviations from a reference price formed on the basis of past purchases. The current price is then perceived as a discount or surcharge relative to this reference price. Thus, immediate effects of price reductions on profits have to be weighted against the resulting losses in future periods. We study how the additional dynamics of the consumers' willingness to pay affect an optimal pricing and inventory control model and whether a simple policy such as a base-stock-list-price policy holds in such a setting. For a one-period planning horizon we analytically prove the optimality of a base-stock-list-price policy with respect to the reference price under general conditions. We then extend this result to the two-period time horizon for the linear and loss-neutral demand function and to the multi-period case under even more restrictive assumptions. However, numerical simulations suggest that a base-stock-list-price policy is also optimal for the multi-period setting under more general conditions. We furthermore show by numerical investigations that the presence of reference price effects decreases the incentive for price discounts to deal with overstocked situations. Moreover, we find that the potential benefits from simultaneously determining optimal prices and stocking quantities compared to a sequential procedure can increase considerably, when reference price effects are included in the model. This makes an integration of pricing and inventory control with reference price effects by all means worth the effort. (author's abstract)

Vendor Managed Inventory (VMI), Consignment Inventory (CI) and a combination of both (C&VMI) are supply-chain sourcing agreements between a vendor and customer. VMI allows the vendor to initiate orders on behalf of the customer. In CI, the customer pays for the goods supplied by the vendor only upon use. The vendor under C&VMI decides customer-replenishments, and owns the goods replenished until they are deployed by the customer. Our thesis studies these agreements in three essays. <br /><br /> The first essay considers a vendor <em>V</em> that manufactures a particular product at a unique location. That item is sold to a single retailer, the customer <em>C</em>. Three cases are treated in detail: Independent decision making (no agreement between the parties); VMI, whereby the supplier <em>V</em> initiates orders on behalf of <em>C</em>; and Central decision making (both Vendor and Customer are controlled by the same corporate entity). <br /><br /> Values of some cost parameters may vary between the three cases, and each case may cause a different actor to be responsible for particular expenses. Under a constant demand rate, optimal solutions are obtained analytically for the customer's order quantity, the vendor's production quantity, hence the parties' individual and total costs in the three cases. Inequalities are obtained to delineate those situations in which VMI is beneficial. <br /><br /> The problem setting in the second essay is the same with that of Essay 1, but the sourcing agreements investigated are now CI and C&VMI. In CI, as in the usual independent-sourcing approach, the customer has authority over the timing and quantity of replenishments. CI seems to favour the customer because, in addition, he pays for the goods only upon use. Under a C&VMI agreement, the vendor still owns the goods at the customer's premises, but at least can determine how much to store there. <br /><br /> The second essay thus contrasts the cases CI and C&VMI, and compares each of them to a no-agreement case. General conditions under which those cases create benefits for the vendor, the customer and the whole chain are determined. <br /><br /> Essay 3 investigates VMI and C&VMI separately for a vendor and multiple customers who face time-varying, but deterministic demand for a single product. In any of those agreements, the vendor seeks the best set of customers to achieve economies of scale. MIP models are developed to find that set of customers, and to determine the vendor's optimal production, transportation, and customer-replenishment quantities. The model for VMI is solved using a heuristic that produces two sub-models, and uses hierarchical solution approach for production, customer-replenishment and transportation decisions. C&VMI model is solved using Lagrangian relaxation. Various numerical examples are used to test the solution approaches used. <br /><br /> In the mean time, the customers can guarantee to be no worse off under VMI or C&VMI than the no-agreement case by setting the right levels of maximum inventory. A model to determine those levels and a solution algorithm are also proposed in Essay 3. <br /><br /> The first two essays can help a vendor or customer in a supply chain to determine the least costly sourcing option, which depends on the relative values of various cost parameters. A vendor with multiple customers can make use of the results in the third essay, which reveal the best possible economies of scale under VMI or C&VMI. Those customers can guarantee to be no worse of than traditional sourcing when they set the proposed levels of maximum inventory.

Practical inventory settings often include multiple generations of the same product on hand. New products often arrive before old stock is exhausted, but most inventory models do not account for this. Such a setting gives rise to the possibility of inter-generational substitution between products. We study a retailer that stocks two product generations and we show that from a cost perspective the retailer is better off stocking only one generation. We proceed with a profit scheme and develop a price-setting profit maximization model, proving that in one and two generation profit models there exists a unique solution. We use the profit model to show that there are cases where it is more profitable to stock two generations. We discuss utility and preference extensions to the profit model and present the general n-product case.

The study aims at investigating how revenue management techniques can be applied in industries which offer multiple products. Most of the companies nowadays trend to produce multiperoducts and they try to find the best method of selling. Therefore, revenue management can be considered as a new direction which should be developed for these firms. In this study, multi-product firms are mainly referred as firms offering a bundle of products or substitute products. In this regard, models and techniques applied in multiproduct firms are discussed and it is tried to provide basic models to better understand the problems, variables, customer choice models and constraints. The main methodology in this study is literature review. In order to carry out the research first revenue management applications and techniques are discussed to find a fit to this kind of industries. The main findings of this study are (1) identifying and analyzing the most important factors affecting decision making regarding managing of bundling and substitute products and ultimately total revenue of multiproduct firms. (2) Summarizing the results and knowledge obtained from various studies within fields of bundling and substitute products. (3) Discussing the possibility of applying different revenue management techniques to these fields. (4) Identifying potentials and new directions for future study with respect to both revenue management techniques and multiproduct firms.