Abstract
Transnational companies, operating in extremely competitive global markets, always seek to lower different operating costs, such as inventory holding costs in their intra- supply chain system. This paper incorporates a cost reducing product distribution policy into an intra-supply chain system with multiple sales locations and quality assurance studied by [Chiu et al., Expert Syst Appl, 40:2669–2676, (2013)]. Under the proposed cost reducing distribution policy, an added initial delivery of end items is distributed to multiple sales locations to meet their demand during the production unit’s uptime and rework time. After rework when the remaining production lot goes through quality assurance, n fixed quantity installments of finished items are then transported to sales locations at a fixed time interval. Mathematical modeling and optimization techniques are used to derive closed-form optimal operating policies for the proposed system. Furthermore, the study demonstrates significant savings in stock holding costs for both the production unit and sales locations. Alternative of outsourcing product delivery task to an external distributor is analyzed to assist managerial decision making in potential outsourcing issues in order to facilitate further reduction in operating costs.
Highlights
In contemporary transnational companies, manufacturing task is often accomplished by a designated production unit, and simultaneously transporting finished items to multiple sales offices in different regions around the world
Chiu et al (2013) studied an intra-supply chain system with multiple sales locations and quality assurance, similar to the one that exists in present-day transnational enterprises
This study is an extension of their work as it incorporates a cost reducing (n + 1) delivery policy into such a specific intra-supply chain system with the purpose of lowering stock holding costs for both the production unit and sales offices
Summary
In contemporary transnational companies, manufacturing task is often accomplished by a designated production unit, and simultaneously transporting finished items to multiple sales offices in different regions around the world Management of such an intra-supply chain system often would like to know the best production- shipment policy in order to minimize the total expected system costs. Karabati and Sayin (2008) studied the coordination problem in a single-supplier multiple-buyer supply chain with quantity discounts They modeled and discussed alternative efficiency of supplier–buyer costs sharing mechanisms, and proposed methods to design the associated discount schemes that take buyers’ expectations into account. Chiu et al (2013) studied an intra-supply chain system in which a single production unit manufactures products to meet the demands of multiple regional sales offices and incorporates quality assurance into its production process. By substituting all parameters in Eq (4), applying the expected values of x to account for randomness of defective rate and with further derivations E[TCU(Q, n + 1)] is obtained as
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