From the Bill ofMaterials of the two finished goods analyzed in Section 7.1, two sub suppliershave a lead time of 50 and above. For the analysis, Beta1,which has a maximum lead time of 50 days, is chosen for two main reasons.
Thefirst one is data availability and the second one is that this sub supplier iswilling to cooperate in lead time reduction initiatives. On the one hand, forthe first finished good, the Spine code 68.614.016, 2 out of 6 raw components replenishedby this sub supplier account for almost 80% of the value purchase to Beta; butone of them has a higher lead time of 50 days. Therefore, the first rawcomponent of the analysis is LIF-60032177. On the other hand, the Trauma code68.027.
002.03 has 3 components replenished by Beta, all with a lead time of 50days as well. For the analysis, we pick the item with the highest value: LIF-50130081.The first rawcomponent, LIF-60032177, is a module used in the Synapse medical case. It isused in the production of two finished goods, both belonging to the sameSynapse product family.
1 quantity is needed to build both products and it hasa lead time of 50 days. This item has a minimum order quantity of 20 pieceswith an average demand of 2 pieces per week. The second rawcomponent, LIF-50130081, is a module leg that is used for the base of themodule of a case. Depending on the finished product, the quantity variesbetween 3-4 pieces per unit. It is used to produce 8 finished goods thatbelongs to two families: Proximal Femoral Nail Antirotation (PFNA) and ExpertLateral Femoral Nail (LFN). This item has a minimum order quantity of 500 pieceswith an average demand of 20 pieces per week. 8.
1.2 Order-up to Model We propose in this section to use an order-upto model for inventory replenishment in the case Acme implement a make-to-stockpolicy for raw components. The Order-up to Model,or Base Stock policy, is an inventory replenishment model in which inventory isreviewed periodically and orders are placed to bring the inventory up to theBase Stock level (Shah J. , 2009). The Base Stock Level covers demand within the leadtime plus the period review. To use this method, Acme needs to look at futureforecast that triggers replenishment of raw components, contrary to the currentorder policy that is based on purchasing orders only for the next three months.
This model is used forsingle items when the demand is a continuous variable and independent betweenperiods; the lead time is constant and deterministic; and the inventory isreviewed periodically. 1 Subsupplier’s name is changed for confidentiality