ETS Chapter 24 Flashcards
(7 cards)
What is safety loss in transportation?
Safety loss refers to the underutilization of resources due to maintaining excess capacity as a buffer against demand fluctuations.
Example: A bus company runs extra buses to handle peak-hour demand, but during off-peak hours, these buses remain mostly empty, leading to resource wastage.
What causes safety loss in transportation systems?
- Over-sizing of transport capacity to avoid rejecting assignments.
- Keeping extra resources available to ensure a high service level.
- Fluctuations in demand that create uncertainties.
Example: Airlines keep standby planes to handle unexpected passenger demand, but these planes often remain unused.
What is safety stock, and why is it needed?
Safety stock is the extra inventory or capacity maintained to meet unexpected demand. It ensures smooth operations despite fluctuations.
Example: A logistics company keeps additional delivery trucks in case of sudden demand surges.
How is safety stock calculated?
Formula:
SL = K * σ * c
K = safety factor
σ = demand variability
c = lead time
Example: A warehouse maintains an extra 500 units of a product to handle unexpected spikes in orders.
How does demand fluctuation impact safety loss?
High demand variability forces companies to keep more safety stock or extra capacity, leading to inefficiencies.
Example: A train company schedules extra trains during uncertain weather conditions but may not always need them.
What is the relationship between safety stock and service level?
A higher service level requires maintaining more safety stock, which reduces resource utilization efficiency.
Example: A shipping company keeps additional containers on standby to ensure timely deliveries but increases costs.
How can companies reduce safety loss?
- Better demand forecasting to reduce uncertainty.
- Dynamic resource allocation to adjust capacity based on real-time demand.
- Flexible contracts to scale resources when needed.
Example: A ride-sharing company adjusts driver availability based on live demand instead of keeping extra drivers on standby.
