Shortage Cost Determination System for Supply Chain Expedite Decisions
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Solution Overview
Problem
Information handling system manufacturers face challenges in determining shortage costs in a repeatable and sustainable manner, especially when dealing with varying objectives from different organizations and the need to expedite material to cover shortages, which complicates coordination and increases costs.
Innovation Solution
A system that determines shortage costs by associating multiple factors with components, analyzing them within a shortage cost model to quantify the costs, and using these quantified costs to decide whether to expedite shipments, allowing for regular review of supply lines and recommendation of economic expedite moves.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If multiple organizations with differing objectives coordinate to manage supply lines, then comprehensive shortage cost consideration is improved, but coordination complexity and decision-making time increase
Solution Approach 1:
The system segments the shortage cost determination into distinct organizational perspectives (e.g., manufacturer, supplier, customer views) with specific cost factors for each. This allows comprehensive multi-organizational cost consideration while managing complexity through structured, modular cost categories that can be independently analyzed and combined.
Solution Approach 2:
The system acts as an intermediary platform that aggregates and analyzes cost data from multiple organizations with differing objectives. By providing a centralized analysis mechanism that weighs various cost perspectives, it resolves coordination challenges while maintaining accurate comprehensive shortage cost determination.
2Productivity
If expedite shipping is used to cover material shortages, then production continuity is improved, but expedite costs increase
Solution Approach 1:
The system changes the parameter of cost assessment from simple expedite cost to a comprehensive shortage cost that includes weighted factors such as production loss, customer impact, and opportunity costs. This allows for more nuanced decision-making about when expedite shipping is truly necessary versus when alternative solutions are more economical.
Solution Approach 2:
The system provides feedback mechanisms that track actual versus predicted shortage costs and expedite outcomes. This feedback loop enables continuous refinement of cost models and improves future expedite decisions by learning from past experiences, thereby reducing unnecessary expedite costs while maintaining production continuity.
3Measurement precision
If comprehensive shortage cost analysis is performed, then economic decision-making is improved, but analysis time and computational resources increase
Solution Approach 1:
The system performs preliminary actions by pre-defining cost factor structures, weighting schemes, and analysis templates for different organizational perspectives. This preparation work is done in advance, allowing rapid execution of comprehensive shortage cost analysis when needed, thereby reducing actual analysis time while maintaining accuracy.
Solution Approach 2:
The system applies local quality by allowing users to focus analysis on specific cost factors or organizational perspectives most relevant to the particular shortage situation. Rather than always performing complete comprehensive analysis, users can selectively analyze only the most critical local factors, reducing analysis time while maintaining decision quality.
Data Source
AI summary
A system that can determine shortage costs in a repeatable and sustainable manner. In certain embodiments, the system takes into account different shortage costs that impact different organizations and weight those shortage costs against the costs to expedite material in to cover those shortages. Additionally, in certain embodiments, the system can continue to be updated based on changing needs of the business and to reflect a true impact of unit shortages so accurate expedite decisions can continue to be made and accounted for that are of the most economic benefit to a manufacturer.