Completed notes of the course Part 2

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64 Copying with variability and uncertainty: Example of customer demand: The first graph is showing us the variability (green arrow and the red arrow): Variability is the difference between the average value and the actual value. Higher is the variability higher will be the capacity that we need to put in place; a way to measure variability is with the standard deviation. The second graph refers to uncertainty: Uncertainty is the difference between the actual value of the demand and the forecasted one. The two phenomena (variability and uncertainty) are not really connected (there isn’t any kind of relation or proportion). It is possible to have a high variability and low uncertainty, or high uncertainty and low variability. How can we cope with these situations? MANAGING VARIABILITY: Variability can be addressed (reduced) using 3 strategies: 1) Decoupling demand and capacity (Buffering): We put a buffer in the middle and we decouple the demand from the market, we separate the offering and the demand. a) Decoupling capacity: With this approach we put a buffer in order to make the inventory responds to the customers’ order. 65 Anytime the warehouse is going below a certain level, production orders are issued to the production system. In this case the buffer is a PHYSICAL BUFFER. b) Pre shop pool: In this case we have customers’ orders, we collect the orders and once the orders are received we put them in a pool that is accumulating them, when we reach a specific number of orders we release them in an operation system in order to complete and deliver them. We collect a number of orders by choosing the proper length of time to create the correct compromise in terms of delivery and terms of mitigation. The average demand rate in the long period has to be the same as the…