Calculation of the Approaches to Cycle Service Level in Continuous Review Policy: A Tool for Corporate Entrepreneur

www.sciedu.ca/bm Business and Managemen Resea ch Vol. 3, No. 1; 2014 Published by Sciedu P ess 54 ISSN 1927-6001 E-ISSN 1927-601X Calcula ion o he App oaches o Cycle Se ice Le el in Con inuous Re iew Policy: A Tool o Co po a e En ep eneu So ia Es elles-Miguel1, Manuel Ca dos1, Jose Miguel Alba acin Guillem1 & Ma a Palme Ga o1 1 Dp o O ganización de Emp esas, Uni e si a Poli ècnica de València, Spain Co espondence: So ia Es elles-Miguel, Dp o O ganización de Emp esas (Edi icio 7D), Uni e si a Poli ècnica de València, Camino de Ve a SN, 46022 Valencia, Spain. Tel: 34-655-68-72-99. E-mail: [email p o ec ed].es Recei ed: Janua y 2, 2014 Accep ed: Feb ua y 17, 2014 Online Published: Feb ua y 28, 2014 doi:10.5430/bm . 3n1p54 URL: h p://dx.doi.o g/10.5430/bm . 3n1p54 Abs ac This pape p esen s wo new app oxima ions o compu e he Cycle Se ice Le el (CSL) in a con inuous e iew policy, as a ool o co po a e en ep eneu . These app oxima ions a e no only o he backo de ing case bu also o he los sales one. In o de o de elop i we ocus on ans o ming a o m o pe iodic e iew policy in a model o con inuous e iew policies. As a esul , he analogy and he ans o ma ion p oposed in his pape a e di e en om Sil e classical model. Due o huge complexi y o he exac CSL calculus he ap oxima e me hods a e needed. The en ep eneu ial dimension, based on in e nal eo ganiza ion and inno a ion, is an inhe en , indispensable pa o he disco e y and c ea ion o oppo uni ies. Acco dingly, his a icle con ibu es o he i ms´ pu sui o compe i i e ad an ages by p esen ing me hods o in e nal managemen o co po a e en ep eneu ship. E icien s ock- aking is a key issue o lowe ing p oduc ion cos and boos ing compe i i e ad an ages, and, by examining his a ea, his pape makes a signi ican con ibu ion o he s udy o co po a e en ep eneu ship. Keywo ds: Cycle se ice le el, Managemen s ock policy, Co po a e en ep eneu 1. In oduc ion En ep eneu ial ac i i y yields compe i i e ad an ages ha o igina e om ma ke oppo uni ies (Shane & Venka a aman, 2000; Shane, 2012), esh combina ions o ac o s ha c ea e oppo uni ies ia inno a ion (Schumpe e , 1934), o s a egic and o ganiza ion enewal (Zo o & Gus a sson, 2008) The la e en ep eneu ial dimension co esponds o co po a e en ep eneu ship, which is linked o he esea ch con ibu ion o his a icle. O ganiza ional enewal, which equa es o g ow h in p oduc i i y o new o ganiza ional o ms ha lead o cos sa ings, may boos he compe i i e capabili ies o he i m. This enewal is he esul o en ep eneu ial ac i i y acili a ed by a deep knowledge o a business sec o , and expe ience and knowledge o a i m´s in e nal managemen . An example ha has ecei ed much a een ion in he ield o quali y managemen and managemen in gene al is he s ock- aking p ocess (JIT) implemen ed by Toyo a (Toyo a P oduc ion Sys em). Sa ings a ising om his e olu ion in he company´s s ock- aking me hod is a p ime example o he esul s o co po a e en eneu ship –whe eby en ep eneus ac as leade s and collabo a o s wi hin an o ganiza ion-, allowing Toyo a o compensa e o he g ea e economies o scale enjoyed by he majo Ame ican au o companies such as Fo d and Gene al Mo o s, and achie e compa able compe i i e ad an ages. Thus, in e nal eo ganiza ion, which in his ins ance includes ela ionships wi h supplie s, was a key ac o in Toyo a´s s a egic and o ganiza ional enewal. Jus as wi h Ma sushi a o Sha p (Nonka & Takeuchi, 1995), he in e nal en ep enue ship p ocess based on inno a ion main ained and e en inc eased he compe i i e ad an ages o his i m. The e o e, in he ield o co po a e en ep eneu ship, new combina ions o ac o s may lead o a mo e e icien use o oppo uni ies (Shane, 2012), o he ex no o c ea ion o oppo uni ies b ough abou by new p oduc ion me hods ha compe i o s a e slow o imi a e. Likewise, such disco e ies may lead o he iden i ica ion o hi he o un apped alue o esou ces, which supplie s only inco po a e in o hei p icing models a e a signi ican ime lag (Shane & Venka a aman, 2000). As Schumpe e (1934) asse s, i migh be he e y eo ganisa ion o p oduc i e o come cial ac i i ies (new combina ions o ac o s o esou ces) ha c ea es oppo uni ies h ough , “ he di e en employmen o he economic sys em´s exis ing supplies o p oduc i e means” (Ibid: 67), o , along he same lines, en ep eneu ial ac i i y as a complex phenomenon ha includes “inno a ion, en u ing and s a egic enewal” (Zo o & Gus a sson, www.scied u Published b y 2008, p. 9 7 This en e p indispensa b p u sui o E icien s examining Below, in s One o h e p obabili y p a e n, gi p ape p es e analogies app oxima unc ion, i n due o hug e The pape i and 3. Sec de elop h e he nume i c 2. In en o Selec ion o manageme n he s a us o p e iodical The in en Ri zman, 2 p oduc ion quan i y Q Pe e son, 1 In en o y P Whe e O H sub ac h e u .ca/bm y Sciedu P ess 7 ). p eneu ial dim e b le pa o he compe i i e a d oc k - aking is his a ea, his p s ic ly echnic a e mos usual m y o no s ocko u en a known s e n s a gene al om he mod ion o in en n dependen a n e complexi y o i s o ganized a s ion 4 explain s e analogy and c al esul s a e y Mana g em e o in en o y p o n policies wi h o he in en o e iew policy. o y managem e 2 000), whe e s and manage m is o de ed w h 998). O de is P osi ion (IP), m H is on-hand, S e commi men Figu e 1. E o l e nsion, based o disco e y an d d an ages by p a key issue p ape makes a a l e ms, we d e m easu es o c u u pe eplenis h ock le el a h app oach o c o els used o c a o y managem e n d iden ically d o he exac CS s ollow. A b i e s he pe iodic de elop he a ca ied ou in S e n Polic y (s, Q o licy depends h andom de m y is pe mane e n policy (s, Q is eo de poi n m en in ope a i h ene e he i n ecei ed L pe m easu e he i e I S R is schedul e (C): l u ion o physi c Business an d 5 5 o n in e nal e o d c ea ion o o p esen ing m e o lowe ing p signi ican co n e elop he p o p u s ome se i c h men cycle. T e beginning o o mpu e he C S a lcula e CSL i e n policy (s, Q d is ibu ed, an d L calculus. e ly in en o y m e iew app oxi a ns o ma ions p S ec ion 6. Fin a Q ) on how o en m and a e di ide d n ly e iewed , Q ) is called o d n and Q quan i ons esea ch a n en o y posi i iods la e and m´s abili y o s I P OH S R  e d ecep ions IP OH S   c al s ock and h d Managemen R 5 o ganiza ion a n o ppo uni ies. A e hods o in e n p oduc ion cos n ibu ion o h p osed esea c h c e is he cycl e T his de ini io n he cycle, (C a S L in a con in u i n pe iodic e Q ) when dema n d eplenishme n m anagemen p ma ions we w i p oposed. The a lly, conclusio n is checked h e d in o wo ma i , we alk abo u d e poin -o de i y o de ed. T h a nd in p ac ic e on eaches e o L can be cons s a is y u u e d R BO and BO is ba c S RBO-C h e in en o y p o R esea ch I S n d inno a ion, A cco dingly, h n al managem e and boos in g h e s udy o co p h model. e se ice le e l n can be ap p li e a dos, Babilon i u ous e iew p o iew policy ( R n d p occes is s n pe iod L is p olicy (s,Q), a n i ll use o impl e compa ision b n s o he pape e in en o y le i n ca ego ies: p u con inuous quan i y o e h e model (s,Q ) e . In in en o y o de poin s o an o a iabl e d emand (K a j e w c ko de s. On ( o si ion in a sy s S SN 1927-6001 is, as discusse d h is a icle con e n o co po a g compe i i e p o a e en ep e l (CSL) ha i n e d o any s oc k i , Palme & Al b o licies (s,Q) a p R ,S). This pa p s a iona y wi h cons an . An a n d CSL a e in e men ou ana l b e ween me h o a e ound in S el (Ca dos e p e iodical and c e iew policy. e o de poin s y ) is an impo a n y managemen o alls below e . I is de ined w ski & i zma n ( Sil e e al., s em (s,Q). So u Vol. 3, No. E-ISSN 192 7 d abo e, an in h ibu es o he a e en ep ene u ad an ages, a n e neu ship. n dica es he s p k policy and d b a acín, 200 9 p plying a mod e p e calcula es h disc e e p o b a logy me hod i oduced in Sec l ogy. In Sec io n o d and he anal S ec ion 7. al., 2009). In c on inuous e In he o he c y s em ( K aje w n model in li e policy (s,Q) a his (Sil e , P as: n , 2000). 1998) in addi u ce: Own 1; 2014 7 -601X h e en , i ms´ u ship. n d, by p eci ic emand 9 ). This e l wi h a CSL b abili y i s used ions 2 n 5 we ysis o en o y iew. I c ase is w ski & e a u e a ixed P yke & (1) ion o (2) www.sciedu.ca/bm Business and Managemen Resea ch Vol. 3, No. 1; 2014 Published by Sciedu P ess 56 ISSN 1927-6001 E-ISSN 1927-601X 3. Cycle Se ice Le el as a Design Requi emen Once managemen policy is de ined, we mus es ablish design he c i e ia o de e mine he policy pa ame e s. Basically he e a e wo me hods: 1) Which minimize cos , and 2) Which minimize in en o y a e age o a ce ain se ice le el. In he i s case, in en o y policies should be conside ed di e en ypes o cos s (Schneide , 1981). In p ac ice, hese cos s a e di icul o es ablish and es ima ed, hey a e disca ded in a ou o a ocus on a p ede e mined se ice le el iew sa is ac ion (Cohen, Kleindo e & Lee, 1988; La sen & Tho s enson, 2008). Mos commonly used design equi emen s a e hose ela ed o cus ome se ice as CSL o P1 (Ca dos e al., 2009: Ca dós & Babiloni, 2011b; Ve eecke & Ve s ae en, 1994), and pe cen age o demand sa is ied wi h physical s ock, called ill a e (FR) o P2 (Dunsmui & Snyde , 1989; Janssen, Heu s & Kok, 1998; Sege s ed , 1994; S ijbosch, Heu s & Van de Schoo , 2000). P esen pape ocuses on CSL. In li e a u e he e a e wo de ini ions o CSL. Fi s , he eina e e e ed o classical, de ines CSL as he p obabili y o no incu ing s ock-ou s du ing he eplenishmen cycle. This p obabili y is equi alen o he sa e y ac o used o calcula e k when demand is no mally dis ibu ed (Sil e e al., 1998). The e o e, CSL is he ac ion o cycles in which a s ockou doesn´ occu : 1 ( in a eplenismen cycle)CSL P s ockou  (3) Axsä e (2006) de ines CSL as “p obabili y o no s ockou pe o de cycle”. Acco ding o (Ca dos & Babiloni, 2011b), his de ini ion and he co esponding exp ession should be imp o ed as ollow: 1) Demand ul ilmen is no aken in o accoun and 2) The e a e a numbe o si ua ions whe e his de ini ion is sca cely use ul. Ca dos, Mi alles & Ros (2006) p opose CSL de ini ion: “ ac ion o cycles in which ha ing demand nonze o is been ully sa is ied wi h physical s ock”. When applied o con inuous e iew policy, cycle demand is always posi i e so: ( demand s ock cycle demand 0)CSL P cycle a ailable  (4) Chop a & Meindl (2001) p opose an es ima ion me hod: ( emand du ing lead ime o L weeks )CSL P D s (5) 4. Pe iodic Re iew Policy App oxima ions 4.1Basic No a ion and Assump ions When a pe iodic e iew policy is applied “e e y R uni s o ime a eplenishmen o de is placed o su icien magni ude o aise he in en o y posi ion o he o de up o le el S” (Sil e e al., 1998). See Figu e 2. Table 1. No a ion used in ecua ions and igu es S = O de up o le el (uni s) R = Re iew pe iod and eplenishmen cycle co esponding o he ime be ween wo consecu i e deli e ies (pe iods), L = Lead ime o he eplenismen o de (pe iods). OH = Physical s ock in ime om he i s ecep ion (uni s). D = Demand (uni s). F (·) = Cumula i e dis ibu ion unc ions o demand du ing pe iods. 4.2 App oxima ion Models o Pe iodic Re iew 4.2.1 App oxima e Me hod o Calcula e CSL in a (R,S) policy wi h backlogs F om Ca dos e al. (2009): ()=() RRL CSL P D OH F S (6) www.scied u Published b y 4.2.2 App o The classi c negligible he CSL is F om Ca d 5. De elo p We make a compa ed Be: d = A e a g R = Time Q = O de S = O de u s = O de p Table 2. T 5.1 A pp o x Taking he The app o x Babiloni ( 2 in his con di e en u .ca/bm y Sciedu P ess o xima e Me h o c al app oxim a chance o no d app oxima e w d os e al. (2009 ) (CSL P D  p men o Anal o a ans o ma i o s. Sil e an s Figu e 2. E o l g e deman d o consume h e quan i y u p o le el, w h p oin ans o ma ions x ima e Me hod ecua ion (6) a n x ima ion ob a i 2 0011a). So w e ex , as we go om ha used ( o d o Calcula e a ion used o c d emand be we e w i h he ollo w CS L ) : )= ( R R D OH P og ies o n in equa io n s o ma ions in l u ion o physi c e a e age dem a h e e S = s+Q p oposes s. S T ans o m a (s,Q) s+Q Q/d L o Calcula e C n d doing he a b CS L i ned h ough h e can say ha he same es u Sil e e al., 1 9 Business an d 5 7 e CSL in a (R, S c ompu e he C e n e iews an d w ing exp essio n (eman d L PD ( DRRL OH   n s seen in Se c Table 2. c al s ock and h a nd whe e R = S il e e al. (1 9 a ion P opose s (R,S) S R 1 L C SL in a (s,Q) p b o e ans o m () L L FsQ h is me hod is his analogies m u l using a di 9 98). d Managemen R 7 S ) policy wi h o C SL in a (R, S d backlog is n o n : d du ing R+L  )=P(D LRL D  c ion 4. Equi a h e in en o y p o Q/ d 9 98) ans o m a s S i l p olicy wi h Ba c m a ions: equal o he a m e hod ge de e en pa h. I s R esea ch I S o u backlogs S ) sys em is b o allowed (Si l S)=F ( ) LR S   OH )=F ( RL LR   a lences can b e o si ion in a sy s a ions l e T ans o m (s,Q) s Q L c klogs a pp oxima ion elopmen s c o s hould be no e S SN 1927-6001 b ased on assu m l e e al., 199 ( ) RL R L OH F   e seen on Fig u s em (s,Q). So u m a ion (R,S) S d*R L+R ob ained by h o nsis en wi h o e d ha he ana Vol. 3, No. E-ISSN 192 7 m ing ha he 8), and conse q () L S u e 2, explain e u ce: Own h e au ho s Ca o he esul s o b logy he e we u 1; 2014 7 -601X e is a q uen ly (7) (8) e d and (9) dos & b ained u sed is www.scied u Published b y 5.2 A pp o x Taking he CSL  In his cas e We should 6. Illus a Compa a i o Babiloni ( 2 b e Poisson Figu e 3. 7. Conclu s Using a d i p olicy (s, Q esul s ob a exp ession I seems h highe de m Finally, h e The e o e, done o ch ex ensi e n demand a n The exam i en ep ene u Acknowle d This esea PAID-06-1 u .ca/bm y Sciedu P ess x ima e Me hod equa ion (1.7) ( Q Q d d PD OH e , using he an a check whe he i e Example o n o exac m e 2 011b) and he dis ibu ed w i CSL s. dema n s ions i e en pa h, Q ) wi h backlo a ined using o h o con inuou h a his new a m and a es dec e example sho w based on he a ac e ize a l e n umbe o dis n d di e en pa i ned model i s u ship. dg emen s ch is pa o 1/2022. o Calcula e C and making h )= (D Q Q d d P O  a logies me ho d (CSL P O  exp ession (1 e hod o CSL new app oxi m i h a known de m n d a e in a (s, Q he same esu l g was ound i n h e app oache s s e iew polic y a pp oxima ion eases apidly w in he Figu con ibu ions e as he cases w ibu ion unc i ame e combi n s , a he sam a p ojec su p Business an d 5 8 C SL in a (s,Q) p h e ci ed ans o ) = QL L d O HD   d we ob ain a m D) OP L O H 0) p o ides b e calculus, app o m a ion me hod m and a e. Q ) policy, (de m l as he one d n Sec ion 5.1. s . A e he a n y (s,Q) wi h l o show pe o m showing almo e 3 e eals d e included in h i w i h he mos ons and an ad e n a ions o in e n e ime, as w e p po ed by h e d Managemen R 8 p olicy wi hou o ma ions: = P(D O H QL d   m o e complex (s)= ( LL PD F e e app oxim a o xima ions m e a e shown in F m and is Poisso n d e elop by C a I could be a s n s o ma ions s h o s sales han h m ance simila s a s ep pa e e ia ions om i s pape , o a impo an de e qua e numbe n o y policy. e a e alk in e Uni e si a P R esea ch I S Backlogs H )=F ( QQ LL dd O  han: ( )s a ions o he e x e hods o bac k F igu e 3. In al l n dis ibu ed, s a dos & Babil o s sumed ha h h own in Sec i o h e one de elo p o he abo e n and inc eas i he o he app a u u e esea c ia ions includ i o cases o e he in oduc P oli ècnica de S SN 1927-6001 ) QQ L dd O HF   x ac CLS ha ( k log and los s l hese cases d s =15, Q=5 and o ni (2011b) o h e used analo g o n 5.2. we de e p ed by Ca dos men ioned ap p i ng he gap b e oxima ions a n c h an ex ensi i ng la ge exp e e xplo ing he d ion, a con i b València, wi Vol. 3, No. E-ISSN 192 7 () L sQ   ( 11). s ales om Ca emand is assu m L=3). Sou ce: o con inuous g y p o ides h e e lop a mo e c o & Babiloni ( 2 p oxima ion, i e ween he exa c n d exac calcu l e analysis sh o e imen , wi h a i e en ca eg o b u ion o co h e e ence n 1; 2014 7 -601X (10) (11) dos & m ed o Own e iew e same o mplex 2 011b). i .e. o c one. l a ions. o uld be a mo e o ies o po a e n umbe www.sciedu.ca/bm Business and Managemen Resea ch Vol. 3, No. 1; 2014 Published by Sciedu P ess 59 ISSN 1927-6001 E-ISSN 1927-601X Re e ences Axsä e , S. (2006). In en o y Con ol, (2nd ed.), Kluwe Academic Publishe s, Sp inge , New Yo k. Ca dos, M. & Babiloni, E. (2011a). Exac and App oxima e Calcula ion o he Cycle Se ice Le el in Pe iodic Re iew In en o y Policies, In e na ional Jou nal o P oduc ion Economics, 131 (1), 63-68. h p://dx.doi.o g/10.1016/j.ijpe.2010.05.012 Ca dos, M. & Babiloni, E. (2011b). 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The P omise o En ep eneu ship as a Field o Resea ch, Academic Managemen Re iew, 25 217-226. www.sciedu.ca/bm Business and Managemen Resea ch Vol. 3, No. 1; 2014 Published by Sciedu P ess 60 ISSN 1927-6001 E-ISSN 1927-601X S ijbosch, L.W.G., Heu s, R. & Van de Schoo , E.H. (2000). A Combined Fo ecas In en o y Con ol P ocedu e o Spa e Pa s. Jou nal o he Ope a ional Resea ch Socie y, 51(10) 1184-1192. Ve eecke, A. & Ve s ae en, P. (1994). An In en o y Managemen Model o an In en o y Consis ing o Lumpy I ems, Slow Mo e s and Fas Mo e s. In e na ional Jou nal o P oduc ion Economics, 35(1-3) 379-389. h p://dx.doi.o g/10.1016/0925-5273(94)90106-6 Zo o, C.D, & Gus a sson, V. (2008). Human Resou ce Managemen as an En ep eneu ial Tool?. In: Ba e R, Mayson, S (eds.). In e na ional Handbook o En ep eneu ship and HRM. Edwa d Elga , Chel enham, UK, 89-110. h p://dx.doi.o g/10.4337/9781848441224.00012 No es No e 1. This is analogal o he Sil e ans o ma ions.