Improving the Backorder Performance by Making Use of Advance Demand Information

This master thesis, conducted at Royal Philips N.V. , reviews the use of advance demand information (ADI) in the service part supply chain (SPSC) of Philips. Next to that, solutions are proposed that make use of ADI in the SPSC. These solutions are applicable to the forecasting of service part demand, the warehouse replenishment of service parts and the shipping of service parts. The overall aim of these solutions is to reduce the amount of backorders within the SPSC of Philips. The ADI consists of information from orders placed long before the requested delivery date. Data analysis shows that the information of these orders is generally reliable. To use the ADI in the demand forecasting of service parts, a method is developed that makes use of ADI for forecasting intermittent demand. Comparing this method to the current service part demand forecasting method used by philips, shows that there is no signi cant difference between the current and proposed method regarding backorders, inventory costs and fi ll rate. When using ADI, the replenishment of service parts is improved as well. When knowing that inventory will drop below the order level, proactive replenishment makes sure that backorders are avoided. This method shows to decrease backorders with over 10%, however it also increases inventory costs with about 10%. The method also shows that if inventory costs are kept the same, backorders are still reduced by 5%. ADI is also used to optimize the shipping strategy, service parts that need to be delivered in the future can be shippped at an earlier stage. This leads to potential costs savings by batching orders or using slower shipments. Furthermore, this method shows to have no negative e ect on the backorders,
inventory costs and ll rate.


Kasper Smeets
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