A virtual warehouse system for production logistics

Abstract

Traditional inventory planning is inadequate to handle the effects of variability, nonlinear relations, and other abrupt factors on product demand. It is difficult for a manufacturer to keep inventory at a level that can cope with disruptive fluctuations. Nevertheless, the profitability of an enterprise greatly depends on a healthy inventory holding. Such a situation is dependent on the know-how, experience, and quality of the planners. Manufacturers often find it difficult to manage inventory when there are abrupt changes in demand, specifically if the production capacity is limited, or if the stock volume of the raw material is low and work-in-process (WIP) is scanty. Production logistics, a highly complex process concerned with the movement, storage and control of inventory provides useful research opportunities. To support production logistic activities to meet the requirements from marketing affiliates, suppliers, and customers, a virtual warehousing approach is proposed for manufacturing enterprises. The WIP inventory is originally built for different customers as per demand forecasts. A certain volume of stock will be stored as a buffer to fulfill unexpected changes in demand. The distribution activities conducted at the upstream end of the supply chain before product differentiation is one of significant areas that can be successfully handled using the virtual warehousing approach. The customization process takes place after some key demand information about specific needs or requirements is revealed. Just-in-time delivery resulting from this practice can have the effect of postponing assembly activities. WIP inventory on the final customer order is then assembled for product customization at the global upstream facility and shuttled promptly to downstream distribution centers. In order to prove the viability of the concept of virtual warehousing, a prototype of a virtual warehouse system (VWS) has been built and trial implemented in a manufacturing enterprise, Schick Asia Limited. With the simulation module in the VWS, the inventory plan is fine tuned to handle the effects of variability, non-linear relations, and other abrupt factors. Rapid changes of demand orders impact the fine tuning of the master plan and the stability of production in Schick. When supply chain events occur and result in shortages in WIP of shaving products, an advisory module in the VWS can also act as an advisor for decision making regarding the WIP inventory allocation. Human decisions on inventory swapping from one production belt to another are different case by case, so this system has been built using various information technologies such as knowledge-based systems. After the implementation of the VWS for selected WIP components in the company, the inventory level for the key components has greatly decreased while the overall customer service level has significantly increased. The inventory visibility offered in the VWS helps the planners to monitor the supply chain, and enables them to offer reliable advice in order to fine tune the supply plan. It directly contributes to the stabilization of the production plan. Whenever unexpected events occur, VWS supports the planner to take curative action with the assistance of decision analytics and reliable functionality. With the application of VWS, the process of planning as well as the loosening of production constraints can minimize the overall inventory level across the supply chain among different parties, and finally lower the cost in the manufacturing enterprise, as happens in Schick.