Cost-based evaluation of different processing rules for backlog and load-building queues in multi-echelon supply chains

Abstract

Backlog and load-building queues introduce delay to supply chains which increase the expected lead time of orders. This study aims to investigate the effects of implementing priority rules on backlog and load-building queues, and the effects of applying different load-building methods on the performance of multi-echelon supply chains based on cost and time measures. Further, the study discovers the impact of improving the lead time of orders on the total cost of multi-echelon supply chains. The study was applied on a two-echelon distribution network that includes one central warehouse, six retailers, and four item types. Customer satisfaction costs were incorporated in the cost structure of the studied network through applying penalties on untimely order deliveries based on delivery windows. A discrete-event simulation model was used to run multiple scenarios of implementing queue priority rules and load-building methods. Results indicated that applying priority rule on backlog queues and altering load building methods are effective in decreasing the average lead time of orders, while they had minimal impact on the total cost of retailers.