Browse Prior Art Database

Safety Stock merged with In Transit Inventory

IP.com Disclosure Number: IPCOM000019991D
Original Publication Date: 2003-Oct-16
Included in the Prior Art Database: 2003-Oct-16
Document File: 3 page(s) / 7K

Publishing Venue

IBM

Abstract

This invention is a new method to control safety stock for Material supplied to Manufacturing sites. Traditionally the raw material is stored at and owned by the manufacturing site. In modern approaches the storage of the raw material is organized near by the manufacturing site in a hub where material ownership and stock level control is with the supplier. This invention describes a third method: Replace the safety stock with in transit stock controlled by the forwarder. Expediting or delaying the material delivery will replace the traditional pulls from safety stock.

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Safety Stock merged with In Transit Inventory

Main Idea of disclosure

1. Problem

Safety stock is needed to buffer any disturbances in the supply chain. Common practice was to have the safety stock in front of the production owned by the Manufacturer. Modern approaches are asking the supplier to maintain a safety stock in front of the customers production line. The Challenge remains how to reduce the overall inventory without exposing the production to unacceptable risks.

    This basic idea for patent is to ask the Carrier to maintain the safety stock thus merging transportation stock and safety stock. This will allow synergy between transportation and storage.

2. Solution The advantages: The Carrier has possibilities to achieve a synergy between safety stock maintenance and minimization of distribution cost on the one hand and between various supply chains on the other hand. Some more details about this:

+ Saving transportation cost by allowing longer transportation times: The Customer defines required material availability date on production site with minimal safety stock. Customer also defines the required supplier ship dates for each shipment. The Customer defines with the Carrier the necessary reliability of deliveries (typically 100 %) and the conditions for expediting shipments (x days advance notice, ...). The Carrier will choose the cheapest transportation which insures the required material availability. For normal conditions (healthy supply chain) this leaves the Carrier a couple of days (the reduction of safety time) as additional flexibility to minimize transportation cost.

+ Safety stock is not needed all at once A safety stock of for example 6 days is normally not absorbed immediately. Even if the Production doubles the Capacity, the safety stock would be consumed in three days. This gives extra flexibility for transportation.

+ Use cheapest storage for material The Carrier can arrange for the cheapest warehouses for storage of material in accordance with the Customer. Guaranteed on time delivery is a prerequisite. Synergy with other supply chains is possible.

+ Carriers task The Carrier optimizes the transportation for each shipment based on the required arrival date. The Customer has some possibilities to pull the required arrival date ahead. The conditions for pulling ahead are agreed as standard conditions with the Carrier. The Carrier has to arrange shipment conditions to allow pulling ahead according to the agreement. Various aspects need to be considered by the supplier:
+ size of shipments + possibility to change service level or mode of transportation during transit + set up expedited shipments bypassing the slow shipments + traffic situations ....

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+ Suppliers task For the supplier there are few changes. He has to make the adv...