Capacity Control and Distribution Problem for Manufactures in Supply Chain Networks

Abstract

Most manufacturing firms have focused on managing efficiently their supply chains that purchasing raw materials, producing final products, and supplying them to retailers. Since a supply chain network is composed of several stages and components, a little variation of retail sales may result in significant changes for each component on supply chains. In this view, a manufacturer is expected both to synchronize its products with the retailer's demand and to coordinate the ordering of raw materials with production processes so that both raw materials and final goods inventories are reduced. In general, the market for final goods can be grouped into different segments, and suppliers can sell the same goods or services to different segments for different price and supply policies to maximize their total revenues. That is the basic concept of RM (Revenue Management) techniques. The success of airline RM has been widely reported, and stimulated development of RM systems for other transportation and service sectors such as hotels, cruise lines, rental cars, retail etc. (McGill and Van Ryzin, 1999; Feng and Xiao, 2006). This paper addresses an integration of SCM(Supply Chain Management) and RM problems in manufacturing systems, specifically, the simultaneous determination of procurement of raw materials, production plan and supply policy for each customer in the circumstance of demand uncertainty. We focus on modeling our problem as a stochastic dynamic programming model. Applying RM techniques, we will develop an optimization model to solve our comprehensive problem encountered in manufacturing, and some computational results with randomly generated problems are reported.