Extending analytical target cascading for optimal supply chain network configuration of a product family

Abstract

Platforming is not only a powerful approach to new product development by sharing common and modular components and processes but also allows the supply chain to gain benefits from risk-pooling effect through shared resources. Analytical target cascading (ATC) is a decentralised method suitable for configuring a hierarchical supply chain of an assembled product while accommodating necessary degree of decision autonomy and information privacy of individual enterprises. Because product variants in a family share platform components, the supply chain structure becomes a weakly networked hierarchy where a small number of elements are laterally linked. In addition, multiple customers who share a common platform component may require the corresponding supplier to use different strategies such as just-in-time (JIT) and lowest price to supply the component. As a result, different decision variables may be involved in the interaction between a shared lower-level element and its different parental elements. This paper develops a new ATC method suitable for dealing with these two special characteristics in supply chain configuration (SCC) for a product family. Numerical results demonstrate that the new method produces better results than those obtained from using the ATC method that only allows a supplier to optimise the supply of the platform component to all its customers with the same strategy.