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Sequencing with Reorder Points in Multi-Echelon Networks Disclosure Number: IPCOM000234791D
Publication Date: 2014-Feb-05
Document File: 7 page(s) / 127K

Publishing Venue

The Prior Art Database


The described method aims the improve the flow of goods in multi-echelon supply chain network by combining the tactical lean practice of reorder points (ROPs) with the operational strength of sequencing.

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Page 01 of 7

Sequencing with Reorder Points in Multi -Echelon Networks

   This disclosure focuses on production processes especially in the Semiconductor Industry, which is very asset intensive. Consequently, a high utilization is crucial to work economically. This industry is also characterized by a high stochastic component in customer demand. Moreover, capacity needs to be shared between the production of different products, which implies the need of changeovers. Finally, each production process is embedded in the larger setting of a supply chain network. All this makes production planning extremely difficult.

   A supply chain or production network can either consist of a single node, called single-echelon network, or a combination of multiple interconnected nodes, called multi-echelon network. The goal of such a network is to produce a final product. At each node, a part of the production of this final product is executed, and then shipped to the next node in the network. If there is the option to ship it to different nodes, then such a network is called a distribution network. On the other hand, if a node requires input from different nodes, then it is called an assembly network. Only a few nodes, possibly only one, face external demand from customers. This demand can be either stochastic or deterministic. Moreover, it can be stationary, that is, the demand has the same properties in each period, or non-stationary, that is, these properties might change over time. Also the external demand can be stochastic. Finally, this disclosure considers the case that the internal production processes behave stochastically because of unforeseen disruptions. There are tree main cost drivers in such networks,

holding costs, the cost of holding stock,

service level or backlogging costs, the cost of not satisfying external demand

from stock,

switching cost, the cost of switching production at a node

   An often applied strategy is to use fixed sequences for the complete planning horizon, allowing to exactly address forecasted demand and changeover costs. However, such a policy is often hard to execute in practice and not very resilient with respect to random disturbances. On the other hand, to deal with exactly these two problems, it is a common lean practice in supply chain management to use reorder points (ROP), that is, cutoff levels until when production is triggered. Unfortunately, such a policy gives little operational guidance. Therefore, this invention aims to combine both methods by having a short sequence which is round-robin executed over the planning horizon and ROPs which limit the inventory levels of each product.


Page 02 of 7

So far, three different problem settings and corresponding solution approaches have been considered in this context:

Single-echelon, stochastic stationary demand, no internal stochasticity -> In this case, a combined single-echelon ROP/sequencing computation can be used

pro: relatively easy problem

con: considers only a sin...