“based homework” is my project. our product is a smart AR glass like google glasses.

“example” is a work from other group which is a different product. so do not copy. example is from page 12-16 “transportation”.

TIM

125

Phase 4

Drone4Life

Professor Subhas Desa

Group 26

Chelsie Baker

Janne Chua

Ke Xu

Tieshan Zeng

Kelly Zheng

1.safety inventory

2.design facility network

3.design transportation network

4.safety inventory module

5.transportation module

6.facility module

7.user manual

8. Executive summary

1. Define:

·

SP1:Make sure that you complete all the tasks that we agreed upon during our Phases 2, project meetings. “Benchmark” (calibrate/compare/contrast) your SCM approach and implementation against Plantronics (see Problem 6 in HW #5).

· SP2:Complete your implementation of cycle and safety inventory for your SC network.

· SP3:Two important new SCM drivers that you should now work on, while we are covering the material in class, are

Facilities

and

Transportation

Network (see “Readings” above).

· SP4: Work on implementing the software (Information) automation for your project using Excel and Visual Basic. For example, create and link demand forecasting module, product cycle and safety inventory modules, transportation module and facilities module.

· SP5: Attempt to simulate your product’s supply chain and examine various scenarios using your integrated software.

· SP6: Align and integrate your high-level strategies (from Phases 1, 2) with the detailed implementations of each driver.

· SP7: Develop the proper SC management guidelines for your team’s product, as well as a simple user’s manual for your software module.

2. Plan

· What information is available for solving the problem?

· For SP1-SP7, we have:

· Lecture Notes of SCM

· Online resources

· Notes of Cycle

Inventory

· Notes of Safety Inventory

· Software Integration

· SCM drivers

· What assumption need to be made to make the solution process manageable?

· We have business analysts and data analysts to analyze the problems

· Audience: the CEO, CTO and Dev, team.

· What analysis needs to be performed to resolve the issues defined in Step 1?

· SP1: Complete the benchmark work, comparison with Plantronics

· SP2: Indicate the cycle inventory and safety inventory

· SP3: Facility and Transportation network

· SP4-5: Software Integration and do a lot of scenarios(calculate the value by using the software)

· SP6: Align and integrate the high level strategies

· SP7: do the SCM guidelines for our products

· How can you provide the information?

· Bullet points

· Description

· Excel tables

· Visual Basic

· Calculations

From TA:

One supplier

Transportation
Inventory
Facilities

Cycle calculations

Dont calculate all suppliers, select one

Select one location

Cycle Inventory and Safety Inventory

1. Define:

· Indicate the cycle inventory and safety inventory

2. Plan
·

3. Execute

SP2: Complete your implementation of cycle and safety inventory for your SC network.

Cycle Inventory for Motor:

Use the list of equation to find our cycle inventory amount:

Annual Ordering Cost = (D/Q)*S

Annual Holding Cost = (Q/2) * hC

Optimized lot size = Q* = sqrt(2DS/hC)

Number of annual orders = D/Q

Total annual Cost = Annual Order Cost + Annual Holding Cost

a. Find EOQ(optimal lot size)

b. Find number of shipments/year(optimal order frequency)

c. Cycle inventory

d. Cycle inventory holding cost/Annual holding cost

e. Find replenishment cycle time (order frequency)

f. Annual Ordering Cost

Annual Demand(D) = 18852

Per Unit Cost(C) = $5

0

00

Holding Cost(hC) = 10% = $500

Shipping Cost/Setup Cost/Cost per order (S) = $200

a. Find EOQ(optimal lot size)

EOQ = QL* = = = 122.807

b. Find number of shipments/year(optimal order frequency)

D/QL* = 18852/122.807 = 153.508 ≈ 153.5 shipments/year

c. Cycle inventory

QL*/2 = 122.807 /2 = 61.403 ≈ 61.4 units

d. Cycle inventory holding cost/Annual holding cost

Cycle inventory * hC = 61.4 * 500 = $30

701

.79

e. Find replenishment cycle time (order frequency)

T = 365/n = 365/61.4 ≈ 2.38 days

f. Annual Ordering Cost

(D/Q) * S = 153.5 * 200 = $30701.79

g. Total Annual Cost:

Total annual Cost = Annual Order Cost + Annual Holding Cost = $30701.79 + $30701.79 = $61403.58

Safety Inventory:

Annual demand (Forecasted) = 18852

Average Weekly Demand = 18852/52 =

362.5

Desired CSL (%) = 95

Lead time (weekly) = 0.34 week

SS = 1.64 * sqrt(0.34) *362.5 =346.65

ROP = DL + SS = 362.5*0.34 + 346.65 = 469.9

SS=346.65

Q

(Items)

T (Time)

(Weeks)

Safety Inventory Model

Lead time = 0.3 weeks

Lot Size: 122.807

ROP=469.9

Demand:

362.5

Because all of our parts are only required one for each products, so the safety inventory of all the parts are the same.

SP2: Facility Network

Define:

· Define the problem: after doing the cycle and safety inventory, two important new elements (SCM drivers) of your project are designing/implementing a Facilities Network

Plan:

· Process to design the facility network

Execute:

Each target city are close to the main army base in each state.

Step 1: distance between warehouse and demanded army base

Target state	Richmond	Los angeles	San Antonio	Columbus	Phoenix
Richmond,VA	0	2234	1263	701	1829
San jose	2873	339.8	1692.4	2479.3	710.8
Austin	1471	1378	79.5	1235.2	1005.9
Atlanta	532.5	2183	988	567	1845
San diego	2634.2	120.6	1275.7	2227.2	354

Step 2: The transportation cost = $1.69* miles

Step 3: Forecasted demand in each region for

Step 4: The Excel sheet for Facility design

Conclusion：

As shown, the best option is to open the plants in Richmond, Austin and San Diego with lowest cost of $23489.7.

Transportation Network:

Define : Implement process and design for transportation network

Plan: the process for transportation network design

Execute:

Step1: Which mode of transportation should be used ?

Total cost =Transportation cost + inventory holding cost

Inventory cost = cycle inventory cost + safety inventory costs + in-transit cost

Conclusion: The mode of transportation we should use is the Truck because the Truck has the lowest cost than other modes of transportation

Step 2 and Step 3: Should inventory be aggregated spatially? Should orders be aggregated in time ?

It should be spatially aggregated because it will minimize the total cost and we made a Excel sheet to analyze three different scenarios

Conclusion: based on the three scenarios, we should choose the truck as transportation mode and make the number of stocking location as small as possible, because it will save a lot of safety inventory cost. The scenario 3 of truck mode is the best option

Step 3: Rank of transportation modes and conclusion:

User Manual

Sheet1:

Choose a Module Window:

· Demand Forecasting Button: Click to select Forecasting method to perform

· Inventory Button: Click to perform Inventory management computations

· Transportation Button: Click to perform Transportation management

· Facilities Button: Click to perform Facility management

Demand Forecasting Module:

· Static Forecasting Button: Click to perform Static Forecasting

· Moving Average Button: Click to perform Moving Average Forecasting method

· Simple Exponential Smoothing Button: Click to perform Simple Exponential Smoothing forecasting method

· Holt’s Method Button: Click to perform Holt’s method of forecasting

· Winter’s Method Button: Click to perform Winter’s method of forecasting

Static, Moving Average, Simple Exponential Smoothing, Holt’s, and Winter’s Forecasting Modules:

· Enter the demand data in spreadsheet Sheet1 from A2 to A21

· Click the specific Forecast method button to run the forecast

· Back button: Click to finish and get back to sheet1

Inventory Module:

· Enter values required in the textbox then click the “Calculate the cycle inventory” or “Calculate the safety inventory” Button to calculate the accordinate inventory values and create a metrics in spreadsheet

· MessageBox pops out “ The values are compute to the spreadsheet”

· Close Button: Click to exit

Facilities Worksheet:

· Solver Button: Click to calculate optimization of facilities

Phase 3 Structured Problem Solving Process

Step 1: Define the Problem

1. Develop/Implement Cycle Inventory

2. Develop software automation

a. Demand Forecasting

b. Cycle Inventory

c. Simulation

3. Create Benchmark of SCM

a. Plantronics

Step 2: Create a Plan

1. Develop/Implement Cycle Inventory

a. Reasons for Cycle Inventory

b. Context of SC Network and SC Stages

c. Best forecasted demand

d. Calculate Cycle Inventory and other values (Enter Formulas for each into Spreadsheet)

e. Graphically show Theia’s Cycle Inventory

2. Develop Software Automation

a. Automate Demand Forecasting in Visual Basic

b. Automate Cycle Inventory in Visual Basic

c. Show simulation of Software Module of Theia Vision’s Cycle Inventory/Demand Forecasting

3. Develop a Benchmark of SCM against Plantronics

Step 3: Execute the Plan

Following contents are the plan in execution.

[1] – Cycle Inventory

Advantages/Reasons for Theia Having a Cycle Inventory

· Average amount inventory used to satisfy demand between shipments → allows Theia to take advantage of economies of scale
· Allows Theia to minimize total inventory costs
· Theia should keep the cycle inventory as low as possible to save money on shipping and storage of inventory costs. → key aspect to maximize profit
· Facilitates the balance of supply and demand for Theia’s products by allowing SPC to satisfy customer demand based on forecasts
· Implementing optimal quantity of inventory to receive from suppliers per each shipment/order allows Theia to minimize holding cost of inventory and transportation cost
· Overall, having a cycle inventory will allow SPC to reduce costs, therefore maximizing their profits

Context of Theia’s Supply Chain

Theia’s Supply Chain Network

Theia Vision’s Best Forecasted Demand for Year 4 (Winter’s Method)

Year

Annual Demand

Period

Forecast

1

578,166

1

15099

2

96110

3

182443

4

284514

2

1,492,695

5

219828

6

330269

7

416538

8

526060

3

2,365,871

9

359812

10

535437

11

659850

12

810772

4

2,504,131

13

499278

14

616411

15

662682

16

725260

Cycle inventory is the average inventory needed to meet customer demand between the order time and when the supply arrives.

Costs are part of the equation due to inventory storage expenses.

⇒ Therefore, we need to know the annual demand of our product as well as the material cost, shipping cost, and holding cost:

Demand (D) = Annual demand (obtained through forecasting) Year 4

2,504,131 Smart Glasses

Cost (C) = Price paid by the manufacturer to the supplier for 1 unit of supply

$300

Inventory holding cost (h%) = cost of holding $1 of inventory for 1 year.

0.1

Fixed Ordering Cost (S) = cost of placing the order and labor for receiving.

$3000

Lot Size (Q) = Number of units in 1 lot of shipment (quantity per shipment)

QL*= √

QL* = √

QL* =12920.6

The amount Theia should load onto each truck is about 12,920.6 Smart Glasses per shipment to minimize total cost based on forecasted demand for year 4. (Efficiency)

Cycle Inventory

QL* = QL*/2

QL* = 12920.6/2

QL* = 6,460.3

The cycle inventory is about 6,460.3 smart glasses at Theia based on annual forecasted demand for year 4.

Explanation ⇒
· Annual Demand obtained from forecasting ⇒ 2,504,131 Smart Glasses
· The Unit production cost in financial modeling was based on Google Glasses prices, and other competitors. Our product is projected to be sold for $300 based on the competitors costs and the components pricing.
· Various other products were evaluated to come to the conclusion of 10% holding cost. Our product is sold for $300 per unit and costs $30 per unit to hold. (30/300=.10
· Based on trucks shipment costs in general and for other small electronic accessories, it was concluded that the ordering cost would be $3000 per trip.

Formulas from textbook/lecture placed into spreadsheet to calculate values below

Theia Vision: Cycle Inventory

Year

Period

Demand

Annual Demand

Unit Cost

Holding Cost(%)

Shipment Cost

Optimal Lot Size

Number of Shipments

Cycle Inventory

Cycle Inventory Holding Cost

Replenishment Cycle Time

Annual Ordering Cost

Material Cost

Annual Total Cost

1

1

15099

578,166.00

$300.00

10.00%

$3,000.00

1738

8.7

869

$26,066.36

10.358179

$295,590.32

$57,816,600.00

$58,112,190.32

2

96110

$300.00

10.00%

$3,000.00

4384

21.9

2192

$65,764.35

4.105568

3

182443

$300.00

10.00%

$3,000.00

6041

30.2

3020

$90,608.69

2.979847

4

284514

$300.00

10.00%

$3,000.00

7543

37.7

3772

$113,150.92

2.386194

2

5

219828

1,492,695.00

$300.00

10.00%

$3,000.00

6631

33.2

3315

$99,459.84

2.714663

$512,138.92

$149,269,500.00

$149,781,638.92

6

330269

$300.00

10.00%

$3,000.00

8127

40.6

4064

$121,910.23

2.214744

7

416538

$300.00

10.00%

$3,000.00

9127

45.6

4564

$136,909.50

1.972106

8

526060

$300.00

10.00%

$3,000.00

10257

51.3

5129

$153,859.35

1.754849

3

9

359812

2,365,871.00

$300.00

10.00%

$3,000.00

8483

42.4

4242

$127,245.98

2.121874

$645,797.63

$236,587,100.00

$237,232,897.63

10

535437

$300.00

10.00%

$3,000.00

10348

51.7

5174

$155,224.56

1.739415

11

659850

$300.00

10.00%

$3,000.00

11488

57.4

5744

$172,317.29

1.566877

12

810772

$300.00

10.00%

$3,000.00

12734

63.7

6367

$191,009.79

1.413540

4

13

499278

2,503,631.00

$300.00

10.00%

$3,000.00

9993

50.0

4996

$149,891.66

1.801301

$669,783.42

$250,363,100.00

$251,032,883.42

14

616411

$300.00

10.00%

$3,000.00

11103

55.5

5552

$166,548.78

1.621147

15

662682

$300.00

10.00%

$3,000.00

11512

57.6

5756

$172,686.68

1.563525

16

725260

$300.00

10.00%

$3,000.00

12044

60.2

6022

$180,656.30

1.494551

CSE 171B Cycle Inventory Spreadsheet

· Each time the inventory reaches ROP, ideally there will be a new shipment of Theia’s Smart Glasses ordered.

· Inventory needs to be replenished approximately every ~1.5 days for Theia’s smart glasses based on forecasted demand in a year 4.

· The average inventory (cycle inventory) is (rounded) approximately 6460.3 units of Smart Glasses in year 4 based on forecasted demand.

· To satisfy annual demand in year 4 of smart glasses Theia needs about (rounded) 193.81 orders or shipments per year.

Conclusion​:

· ​From our demand forecasting results, the annual demand for year 4 is estimated to be 2,503,631.0 units.

· We should have 193.81 shipments per year with a cycle inventory of 12920.6 units (Year 4)

· Costs totaling around $251,032,883.42 (Year 4)

[2] – Software Automation – Demand Forecasting – Product Cycle Inventory Model – Simulation

1. User enters demand for product

2. User clicks buttons “Choose Module”

3. User selects either demand forecasting or inventory

a. If User Selects Demand Forecasting

i. If user selects:

1. Static Forecasting

2. Moving Average (4 Point, 4 Periods into future)

3. Simple Exponential Smoothing

4. Holt’s Method(Not completed)

5. Winter’s Method (Not Completed)

b. If User Selects Inventory (Not completed)

[3] – Benchmarking

Calibrating/Comparing/Contrasting of Theia’s SCM approach and implementation against Plantronics

Competitive Strategy Comparison (Theia VS. Plantronics)

Context:

Source of Competitive Advantage

Low Cost

Differentiation

Strategic Target

Broad

Cost Leadership

Differentiation (Theia)

Narrow

Focused

Theia’s Competitive Strategy

· Theia Vision has a broad audience of consumers that are primarily focused towards technology savvy individuals and those with visual/hearing impairments.

· Customers can purchase Theia Vision from common retailers (Amazon, Walmart, Bestbuy, Target, etc.) and, of course, from our website.

· At Theia our business process is focused towards innovation and marketing of our products and features. With customer satisfaction in mind, we are able to offer features that our competitors can’t.

· Key business partners include battery suppliers, parts wholesalers, and logistics companies

Force

Strength

Explanation

Competitors

HIGH

Intra-Industry Competition Level is High: Companies are working hard to capitalize on this rapidly growing market. So far, Vuzix’s AR Glasses are considered the top performing AR Glasses. However, their pricing is very steep so we will see how they hold up when the New Entrants come in.

New Entrants

HIGH

Threat Level for New Entrants is High: The barrier to entry is extremely low as we see big companies such as Amazon, Facebook, Microsoft, and most alarmingly, Apple trying to enter this market. Apple and Microsoft are currently in its production stage for AR Glasses with Microsoft’s HoloLens already available for preorder.

Suppliers

MED

Suppliers have Medium Power: as there are only a few businesses in the world that specialize in lens crafting and frame crafting. Luxottica makes glasses frames for virtually, most of the frame industry so if we were to use them as our supplier, it would be hard to be in control of the pricing as they are a monopoly within their industry.

Buyers

Low

Consumer Power is Very Low: Since There is insubstantial price differentiation between products, the bargaining power of consumers is low.
There are no low-cost providers within this industry and it is unknown if this can even be a possibility at this time, given the technology needed for AR Glasses and our modern environment.

Complementors

LOW

Potential Complements Include: services/features such as the Amazon Alexa, Weather Channel App, and Google/Google Maps. These are three add-ons that could prove to be quite useful in conjunction with AR Glasses.

Substitutes

LOW

Few substitutes including, other smart accessories, (apple watch, etc.)

Force

Strength

Explanation

Competitors

High

Competitors are well established, large players. Consumers trust and go to them for headsets. Large number of competitors

New Entrants

LOW-MED

Few barriers to entry, cost of production is relatively low

Suppliers

LOW

Component suppliers are abundant, and global

Buyers

High

Consumers can easily purchase a new product and move on.

Complementors

LOW

Few complementors to headphone (maybe laptop and phone discount deal)

Substitutes

LOW

Few substitutes in headset industry

Source of Competitive Advantage

Low Cost

Differentiation

Strategic Target

Broad

Cost Leadership

Differentiated

Narrow

Focused Plantronics

Plantronics Competitive Strategy

· Focused Strategy

· Headsets are focused toward consumers using gaming consoles, phones, and computers

· Plantronics product will satisfy customer needs in these areas

· Consumers (entertainment)

· Business sector(sales focus on IT departments, help desk etc.)

· High quality assurance

· Large cost savings on equipment/service fees (Unified Communications)

· Improved collaboration decreases wasted resources/time to maximize efficiency/profits

· Innovative products that perform well

· R&D into new product platforms in their focus area

Responsiveness/Efficiency Spectrum

Highly Efficient SC

Somewhat Efficient SC

Somewhat Responsive SC

Highly Responsive SC

Plantronics

Theia

In terms of where Theia lies in the Responsiveness/Efficiency Spectrum, we would like to be a company with a highly responsive supply chain. Since a portion of our business involves custom glasses for those with visual impairments, it is necessary for us to be able to build a pair of glasses tailored to individuals as well. Our customers shouldn’t have to wait for weeks just to receive a product they ordered online, so to provide the best experience from end to end, we will develop our supply chain to be highly responsive. In comparison, competitors like Vuzix and Google Glass lie more to the left of the spectrum, where Google Glass is somewhat responsive and builds enterprise level glasses for businesses. Vuzix is yet further down, and instead opts for a somewhat efficient supply chain, since their glasses are more for the general consumer “one type fits all” style.

Plantronics requires a somewhat Responsive SC, in order to address customers because their products are innovative.

Implied Demand Uncertainty

Low Uncertainty

Somewhat Low Uncertainty

Somewhat High Uncertainty

High Uncertainty

Plantronics

Theia

· High Uncertainty

· Theia Vision is a ground breaking, innovative product (Differentiated product strategy)

· Market may not initially accept the product (High Uncertainty)

· Somewhat High Uncertainty

· Plantronics implements new product lines that are innovative

· Customer trust in their new lines may cause some uncertainty

Theia/Plantronics Supply Chain Strategy

Our product will have a highly responsive SC overall. Meaning that our SC can respond quickly to customer demands with our multiple product lines, large quantities being shipped, short lead times, and high quality of service. Using the Responsiveness vs IDU spectrum allows us to understand our strategic fit and expand the zone to match company goals.

Plantronics fits in at a similar position as Theia, because they have somewhat high responsiveness and somewhat high uncertainty. Both Theia Vision and Plantronics Headsets are innovative and require responsiveness in the Supply Chain.

Conclusions/Comparisons Between Theia and Plantronics SCM

Plantronics’ Global SCM

Theia’s SCM

· Pull Model (Integrated Networks)
· Demand Driven
· Global inventory visibility (accurate)
· Correct PO Prices, receives acknowledgements and commits from suppliers
· Virtual Supply Chain
· Higher accuracy shipping dates/time to customers at order entry
· Faster, more effective, sales, and operations planning process
· Decision Based
· ‘Lean” Practices
· Automate Manual Transactions
· Somewhat high uncertainty
· Somewhat high responsiveness

· High Uncertainty
· Theia Vision is a ground breaking, innovative product (Differentiated product strategy)
· Market may not initially accept the product (High Uncertainty)
· Highly responsive supply chain.
· Since a portion of our business involves custom glasses it is necessary for us to be able to build a pair of glasses tailored to individuals as well.
· customers shouldn’t have to wait for weeks just to receive a product they ordered online,
· Rapid, effective sales/operations
· Tracking of product/materials (increase in responsiveness
· Demand Driven → inventory based on demand forecasts

Step 4: Check

The frameworks used are provided in the textbook and in lecture, therefore the information above is correct. The forecasted demand is checked based on calculations by hand and carefully checking the spreadsheet. Our benchmarking comparison takes into account both companies competitive strategies and aligned SC strategy. We provided as much context as possible to complete the assignment. Our software automation modules automates demand forecasting using the moving average method

Step 5: Learn & Generalize

Based upon research conducted on Plantronic’s supply chain, we can create an effective supply chain for Theia. Plantronics fits in at a similar position as Theia, because they have somewhat high responsiveness and somewhat high uncertainty. We decided to create a highly responsive SC overall. Meaning that our SC can respond quickly to customer demands with our multiple product lines. Our cycle inventory above takes into account previous phases financial model and demand forecasting. After completing cycle inventory