Risk-pooling essentials: reducing demand and lead time uncertainty

96 Pages·2015·2.916 MB·English

by  Oeser, Gerald

SPRINGER BRIEFS IN BUSINESS
Gerald Oeser
Risk-Pooling
Essentials
Reducing Demand
and Lead-Time
Uncertainty
SpringerBriefs in Business
More information about this series at http://www.springer.com/series/8860
Gerald Oeser
Risk-Pooling Essentials
Reducing Demand and Lead-Time
Uncertainty
1 3
Gerald Oeser
Department of Logistics Management
European University of Applied Sciences
Neuss
Germany
Additional material to this book can be downloaded from http://extras.springer.com.
ISSN 2191-5482 ISSN 2191-5490 (electronic)
SpringerBriefs in Business
ISBN 978-3-319-14156-5 ISBN 978-3-319-14157-2 (eBook)
DOI 10.1007/978-3-319-14157-2
Library of Congress Control Number: 2014958889
Springer Cham Heidelberg New York Dordrecht London
© The Author(s) 2015
This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part
of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission
or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, express or implied, with respect to the material contained
herein or for any errors or omissions that may have been made.
Printed on acid-free paper
Springer International Publishing AG Switzerland is part of Springer Science+Business Media
(www.springer.com)
Preface
“Uncertainty is the only certainty there is, and knowing how to live with insecurity
is the only security”.1
Therefore, this book provides the essential know-how on risk pooling enabling
you to reduce demand and lead-time uncertainty in your operations.
As Prof. Dr. Dr. h.c. Knut Richter calls Oeser (2011, p. VI) “no light diet”‚ this
contribution condenses the results of Oeser (2011) and Oeser (2012) to a holis-
tic, but more digestible and practice-oriented summary (giving an overview of
more than 600 publications on risk pooling). In addition, it provides a computer-
ized Risk Pooling Decision Support Tool for companies to choose suitable risk-
pooling methods and its application to a real-world example. The software can be
downloaded without charge from “SpringerExtras” (http://extras.springer.com/)
after purchasing this book. You will find the password for using this software in
Sect. 3.2.
According to the Jury of the Stinnes Foundation’s DB Schenker Award 2012,
Oeser (2011) features an unconventional examination of risk management, which
is a very popular topic in the scientific logistics and supply chain management dis-
cussion right now. It is written refreshingly clearly and practice-orientedly.2
Oeser (2012) was one of the three final contributions to the BME Science Prize
competition at the 5th Scientific Symposium of the German Association Materials
Management, Purchasing and Logistics e. V. and published by Gabler.
1 John Allen Paulos, Professor of Mathematics at Temple University in Philadelphia.
2 Letter from Dr. Karl-Friedrich Rausch, the Member of the Management Board of DB Mobility
Logistics AG responsible for the Transportation and Logistics Division and thus for the activities
of DB Schenker, and Michael Kadow, Stinnes Foundation, dated April 24, 2013. The members
of the Jury of the Stinnes Foundation’s DB Schenker Award 2012 are Dr. Karl-Friedrich Rausch
(chairman), Prof. Peter Klaus (Friedrich-Alexander-University Erlangen-Nuremberg), Prof. Dr.
Dr. h.c. Hans-Christian Pfohl (Technical University Darmstadt), and Prof. Dr.-Ing. Frank Straube
(Technical University Berlin).
v
vi Preface
Researchers and students of operations management, logistics, and operations
research will find a lot of new and interesting information, also a lot of problems
for further research. Consultancies and managers will be able to use many of the
discussed solutions for reducing complexity in their projects.3
3 Prof. Dr. Dr. h.c. Knut Richter in Oeser, 2011, p. VI.
What You Can Find in This SpringerBrief
– A critical review of the more than 600 publications on risk pooling that dis-
solves common misconceptions
– Comprehensive and concise definitions of risk pooling and ten identified risk-
pooling methods
– A straightforward statistical explanation of risk pooling
– A value chain-oriented framework for analyzing risk-pooling methods
– A downloadable computerized decision support tool to compare and choose
appropriate risk-pooling methods and its application to a real-world example.
vii
Contents
1 Introduction ................................................ 1
2 Risk Pooling in Business Logistics .............................. 5
2.1 Defining Risk Pooling ................................... 5
2.2 Defining Methods of Risk Pooling .......................... 9
2.3 Explaining Risk Pooling ................................. 15
2.4 Placing Risk Pooling in the Supply Chain, Business Logistics,
and a Value Chain ....................................... 20
3 Choosing Suitable Risk-Pooling Methods ........................ 25
3.1 The Risk-Pooling Methods’ Favorable Conditions,
Advantages, Disadvantages, Performance, and Trade-Offs ....... 25
3.2 A Risk Pooling Decision Support Tool Based on Contingency
Theory ............................................... 30
4 Applying Risk Pooling in Paper Wholesale. . . . . . . . . . . . . . . . . . . . . . . 37
4.1 Demand and Lead-Time Uncertainty in Paper Wholesale ........ 37
4.2 Suitable Risk-Pooling Methods for a Paper Wholesale Company ... 42
4.2.1 Emergency Transshipments ........................ 46
4.2.2 Centralized Ordering ............................. 52
4.2.3 Product Pooling ................................. 60
4.2.4 Inventory Pooling ................................ 61
4.3 Lessons Learned ........................................ 63
5 The State of Risk Pooling in Germany .......................... 65
6 Conclusion ................................................. 69
You Can Take Away with You from This SpringerBrief ............... 73
Bibliography .................................................. 75
ix
Chapter 1
Introduction
Abstract Demand and lead-time uncertainty increase in logistics and supply
chain management, but can be mitigated by risk pooling. The extensive, but frag-
mented, inconsistent, and mainly theoretical risk-pooling literature offers little
help in choosing between and implementing risk-pooling methods. Therefore,
this book provides (1) comprehensive and concise definitions of risk-pooling and
ten identified risk-pooling methods, (2) a straightforward statistical explanation
of risk pooling, (3) a value-chain oriented framework for analyzing risk-pooling
methods, (4) a downloadable computerized decision support tool to compare and
choose appropriate risk-pooling methods for different economic conditions based
on a contingency approach, (5) its application to a real-world example, and (6) the
status of risk pooling in German manufacturing and trading companies.
Keywords Risk management · Supply chain management · Logistics · Demand
uncertainty · Lead-time uncertainty · Uncertainty reduction · Applied research
Product variety has increased dramatically in almost every industry1 particularly due
to increased customization.2 Product life cycles have become shorter, demand fluctu-
ations more rapid, and products can be found and compared easily on the internet.3
This causes difficulties in forecasting for an increased number of products,
demand and lead-time uncertainty, intensified pressure for product availability, and
higher inventory levels4 to provide the same service.5 This trend is expected to
continue and likely grow worse.6
1 Cox and Alm (1998), Van Hoek (1998a, p. 95), Aviv and Federgruen (2001a), Ihde (2001,
p. 36), Piontek (2007, p. 86), Ganesh et al. (2008, pp. 1124f).
2 Ihde (2001, p. 36), Chopra and Meindl (2007, p. 305), Piontek (2007, p. 86).
3 Rabinovich and Evers (2003a, p. 226); Chopra and Meindl (2007, pp. 305, 333).
4 Dubelaar et al. (2001, p. 96).
5 Ihde (2001, p. 36), Swaminathan (2001, pp. 125ff.), Chopra and Meindl (2007, pp. 305, 333),
Rumyantsev and Netessine (2007, p. 1).
6 Cecere and Keltz (2008).
© The Author(s) 2015 1
G. Oeser, Risk-Pooling Essentials, SpringerBriefs in Business,
DOI 10.1007/978-3-319-14157-2_1