DePuy
Synthes is then using a make-to-stock policy for inventory replenishment as
lead time of supplier is longer than the time a customer is willing to accept.
Having a long lead time results in inaccurate demand forecast; thus, planners
need to build more safety stock to cover from any volatility coming from demand
and supply side inside this replenishment period. As demand changes when time
passes, the stock produced may either not be used to real customer orders,
increasing inventory of finished goods at DePuy Synthes’ primary hub and costs;
or there are customer orders that appear but were not forecasted and safety
stock do not cover neither. In this case, DePuy Synthes asks to prioritize
these orders, leaving aside the regular jobs that were purchased ahead of time.
As Flextronics uses a make-to-order strategy for its raw components, the
priorities needs to be fulfilled either by using left-over inventory of
previous raw materials orders or by using raw components that were planned to
be used by regular jobs. As long as new priorities appear, regular orders keep
waiting to be produced or be shipped to Switzerland. This leads to a decrease
in inventory for all other SKU’s to a point where there is no safety stock to
cover, causing backorders to increase or at least to remain at the same level.
This is the moment when the planner checks supply parameters and find out that
goods arrives or will arrive one month later than the lead time agreed. These
numbers may lead to a decision of increasing supplier lead time. However,
having longer lead times will lead to a cycle called The Response Time Spiral
for make-to-stock products recreated by Suri (2010) shown in Figure 9. At the end, it results in having a less accurate forecast,
which leads to have more inventory that is not needed, and having customer
orders that are not fulfilled, thus increasing hot jobs that need to be
expedite and leaving behind regular jobs that still have regular orders

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