Developing an analysis tool for risk calculation in supply chain operations

Abstract: Problem: The case study company, BorgWarner, currently has no quantitative method for evaluating the risks connected to different inventory levels throughout their internal supply chain. Meanwhile there are internal goals for lowering the amount of capital tied in inventory. Purpose: The purpose of this thesis is to investigate how changes in the component and finished goods inventory levels affect the service level. Currently, the inventory level in each instance of inventory is set manually by the material and production planners and is based on their experience. Consequently, there is no way to evaluate the impact or quantify the risks of stock-outs if there is a decision to lower the inventory levels. The outcome of this thesis is a quantitative tool that shows how changes in inventory will affect the service level towards the customers and the capital tied in inventory. Delimitations: The scope is limited to only include BorgWarner TTS Landskrona and to only analyze the effect on the customers and products associated with the serial production. Only the immediate suppliers and customers will be included. Spare parts and any return flows are excluded from the scope of this thesis. Methodology: The thesis work was carried out by a comprehensive value stream mapping of all activities and processes connected to the internal supply chain, such as; forecasting, product assembly and stock keeping. The value stream map formed the basis for the data analysis from which statistical conclusions could be drawn. Finally, the analysis formed the basis for the quantitative tool. Result & conclusion: To fulfill the thesis’ purpose, a computerized analysis tool has been developed. The tool evaluates the effect a change in inventory level has on the service level and capital tied in inventory. The approach during this thesis has both contributed to the effectiveness of obtaining the results and for the validation of the analysis model.