Managing Demand Risk in Tactical Supply Chain Planning for a Global Consumer Electronics Company

Production and Operations Management (POM), Vol. 14, No. 1, pp. 69-79, 2005

37 Pages Posted: 17 Jul 2010 Last revised: 18 Jan 2011

See all articles by ManMohan S. Sodhi

ManMohan S. Sodhi

City University London - Sir John Cass Business School

Date Written: January 25, 2005

Abstract

We consider the problem of managing demand risk in tactical supply chain planning for a particular global consumer electronics company. The company follows a deterministic replenishment-and-planning process despite considerable demand uncertainty. As a possible way to formally address uncertainty, we provide two risk measures, “demand-at-risk” (DaR) and “inventory-at-risk” (IaR) and two linear programming models to help manage demand uncertainty. The first model is deterministic and can be used to allocate the replenishment schedule from the plants among the customers as per the existing process. The other model is stochastic and can be used to determine the “ideal” replenishment request from the plants under demand uncertainty. The gap between the output of the two models as regards requested replenishment and the values of the risk measures can be used by the company to reallocate capacity among different products and to thus manage demand/inventory risk.

Keywords: consumer electronics, demand uncertainty, stochastic programming, demand allocation, risk

Suggested Citation

Sodhi, ManMohan S., Managing Demand Risk in Tactical Supply Chain Planning for a Global Consumer Electronics Company (January 25, 2005). Production and Operations Management (POM), Vol. 14, No. 1, pp. 69-79, 2005, Available at SSRN: https://ssrn.com/abstract=1640856

ManMohan S. Sodhi (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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