Case 10 for Global Pharma is posted. In our class topic, postponement was applied conceptually to a point in customizing manufacturing processes. This case differs in that the main objective is to illustrate the impact of purchasing postponement on the cost parameters of the buyer and supplier in order to determine the optimal level of postponement so that the total cost of the supply chain can be minimized. This will help you understand the concept of demand-side and supply-side risk in a supply chain and how these risks can have a substantial bearing on supply chain strategies.
Read the case and complete the following conceptual questions:
1. What are the cost parameters for both Global Pharma and its supplier that are likely to be affected due to the postponement of the order placement decision by Global Pharma?
2. What are the likely effects of the postponement decision on each of these cost parameters?
3. How could these changes be incorporated in the total annual cost of inventory management for Global Pharma?Bonus!! Construct a model in excel to answer the following questions (Hint: look back at the basics for economic order quantity (EOQ) this is the point in inventory management where for a given order quantity, holding costs are equal to order costs):
4. What is the optimum level of postponement for which the total annual cost is minimized?
5. How would this relationship change with various values of supplier lead time variability?
6. How would this relationship change with various values of demand variability?
7. How would this relationship change with various values of service level requirement?