In this paragraph the input parameters are discussed. They are treated one by one. A distinction is made between the parameters which depend on the part and parameters which are independent of the part. This distinction is important since the βfixed parametersβ do not have to be changed when the method is applied to different parts, whereas the βpart dependent parametersβ do need to be changed.
6.3.1 Part dependent parameters
Parts per location (ππ), is dependent on the size of the part and the type of the location. The location can be either a shelf or a pallet. The storage capacity in dimension of a pallet and a shelf is shown in Table 3. The dimensions of the part can be found in SmartTeam. Based on that information, the number of parts per location can be easily calculated by dividing the surface of the location by the surface of the part. However, this will not lead to an exact answer, since it does not take into account how the parts have to be arranged. Therefore the most precise way of determining the part per location is too calculate based on the length and width of the part and the location how many parts can be located at the location.
Type of location Dimensions (l*w*h) Shelf 80*40*20
Pallet 120*87*40
Table 4 β Dimensions of storage locations (in cm)
Re-processing cost (π π), Fixed order cost (πΉπ) and Inspection cost (πΌπ), are made at re-processing. These prices can be requested at the supplier, assuming that the supplier performs the re-processing, which is the initial intention.
Purchasing cost (ππ), is the price for which Vanderlande buys the part at their supplier. The purchase costs for all parts can be found in the ERP system.
Markup (ππ’), is the percentage by which the purchase price is increased in order to arrive at the sales price. The markup can be found in the ERP system.
Compensation fee (πΆπΉ), is the amount of money which is offered to the customers for their failed part. The compensation fee is a percentage of the sales price, for which the customer has bought the part when it was new. The compensation fee is new, since previously parts where not taken back by Vanderlande. Therefore there are no values available. The compensation fee has to be determined based on the different factors which influence the fee. These factors and how they can be determined have been discussed in paragraph 5.4.2.
Re-processing discount, is the discount which Vanderlande offers their customers on a re-processed part compared to the price of a new part. Such a value is not yet determined by Vanderlande, since they do not sell re-processed parts yet. In paragraph 5.4.1 it was discussed how this discount can be determined. Demand occurrences (π·ππ¦πππ), is the expected number of demand occurrences for the next year. This is determined by taking the weighted average over the historic demand.
Demand (π·π¦πππ), is the expected demand over the next year. This is determined by a weighted average over the historic demand.
Reorder point (π ), depends on the model which is used. The reorder point for the push and pull model can be determined through the formulas given in 5.2.2.
Order up to level (π), depends on the model which is used. The order up to level for the push and pull model can be determined through the formulas given in 5.2.2.
Safety stock (π π ), depends on the model which is used. The safety stock for the push and pull model can be determined through the formulas given in 5.2.2.
Minimal service level, is based on a value judgment of the management of Vanderlande. They can base their decision on the criticality of the part.
6.3.2 Fixed parameters
Weighted average cost of capital (ππ΄πΆπΆ), is the percentage at which Vanderlande values a certain investment. In the context of the research the WACC is used to value the inventory of failed, re-processed and new parts. Currently Vanderlande uses a value of 4 percent for the consignment stock. Since in both cases it concerns an investment in inventory, the same value will be used for the WACC in the context of this research.
Cost per location (ππΏ), are quoted by the 3PL which operates the SCW. The prices per shelf or pallet are based on the period of a week and are respectively β¬ 0,59 and β¬ 0,87.
Cost per inbound order line (πππΏππ) and Cost per outbound order line (πππΏππ’π‘), are both variable costs, in the sense that they are determined per period based on the number of man hours which were needed to
process the order lines. Also fixed costs for using material like forklifts is included. However, as a rule of thumb the 3PL provided a cost per inbound and outbound order line which can be seen as the expected value. This is β¬3,75 per inbound order line and β¬9,77 per outbound order line.
Coordination time per demand occurrence without return (ππ1) and Coordination time per replenishment order (ππ3), are activities which are currently performed by the employees of Vanderlande. Therefore these coordination times were relatively easy to estimate. Table 5 provides an overview of all coordination times under the RTO model.
Labor cost (πΏπΆ), is the cost for one hour of the time of an employee. This value is estimated based on the average wage of the employees at the SCMS department. Here an additional costs needs to be taken into account, since the costs for an employer are always higher than the gross income of an employee. This results in an estimated labor cost per hour of β¬50.
Coordination time per demand occurrence with return (ππ2), is based on the expert opinion of employees at Vanderlande. The employees do not have experience with some aspects of the activities, since currently parts are not returned. Based on the flowcharts it was explained what the activities exactly consist of and based on their experience the employees have estimated the time that this will take them. This has been done by different employees and independent of each other they came to approximately the same result. Therefore, this result is deemed a good estimation. The values can be found in Table 5 where an overview is presented of all coordination times.
Notation Activity RTO model (time in minutes) Push model (time in minutes) Pull model (time in minutes) Currently (time in minutes) ππ1 Demand occurrence without return 15 10 10 15 ππ2 Demand occurrence
with return 25 25 20 n.a.
ππ3 Replenishment order n.a. 5 5 n.a.
Table 5 β Coordination times per trigger
Transportation tariffs are quoted by the 3PL which primarily handles the transportation. As mentioned before, the tariffs depend on the countries between which the transport takes place and the weight of the package which is sent. Therefore the tariffs are quoted for different weight intervals towards different countries. Since all packages which are sent by Vanderlande originate from the Netherlands, only tariffs between the
Netherlands and other countries are provided.