Long supply chains for technology companies in the United States combined with the need for timely delivery of products to customers has brought challenges to planning. The global pandemic added even more complexity to meet demand for timely delivery(Dell Technologies).
Read More: ShippingEasy Announces New Integration With Buy On Google
“The hybrid replenishment strategy does not currently have a closed solution in the operation research field to identify optimal safety stock targets while minimizing total fulfillment costs”
Dell Technologies adopted a hybrid replenishment strategy using both ocean and air shipping to ensure inventory and service levels while reducing logistics costs. The supply chain strategy team evaluated the static initial inventory policy to identify an optimal solution that would minimize total fulfillment cost.
Francisco Erize, a supply chain digital automation product owner at Dell Technologies, has more than 15 years of experience at Dell in operations research and business improvement. Erize is focused on supply chain technical solutions to improve demand forecasting and strategic supply planning.
Read More: SalesTechStar Interview with Dale Durrett, Vice President of Partnerships at Bombora
“Safety stock” inventory provides a buffer that enables the company to achieve a desired service level despite uncertain demand. Weeks before the final replenishment decision is made to match the target inventory, replenishment planners have the option to place long lead time orders.
The lower cost, slow replenishment mode can be ocean or rail depending on the geographic region. For example, for North America this long lead time is the seven weeks from China. The objective of placing these early inventory replenishment orders is to save freight costs by avoiding the need to replenish by air, however this decision carries the risk of increasing the inventory level beyond the required target.
“The hybrid replenishment strategy does not currently have a closed solution in the operation research field to identify optimal safety stock targets while minimizing total fulfillment costs,” Erize said. “While we are working with an academic research team to achieve a closed solution, we have created an empirical solution based on Monte Carlo simulation models for inventory replenishment using @RISK.”
