Abstract
Operating in unstable and competitive globalized markets, management of today’s transnational enterprises continually searches for different alternatives to maintain product quality, streamline production activities, and reduce overall operating costs, particularly in their internal supply chain system. With the aim of revealing and offering insight information to support managerial decision making, this study explores the optimal replenishment lot-size and shipping frequency problem for an intra-supply chain system with a partial outsourcing policy and random scrap. In this study, the demand of a product is partially outsourced and partially fabricated by the production units, to release the workload of machine and smooth production schedule. During the fabrication process, a portion of random scrap items is produced, and finished products are distributed to sales locations using a multiple-shipment policy. The objective is to simultaneously determine an optimal fabrication lot-size and shipping frequency decisions that minimize the overall expected costs for such an intra-supply chain system. Mathematical modeling and optimization methods are used to solve the problem. Moreover, through the use of a numerical example and sensitivity analyses, various important insights with regard to the joint effects of the partial outsourcing policy and random scrap on the optimal solutions are revealed to support managerial decision making.
Highlights
Operating in competitive globalized markets, management of today’s transnational enterprises constantly searches for different alternatives in order to maintain product quality, streamline production activities, and reduce overall operating costs, in their internal supply chain system
Due to the existence of production capacity constraint in most real manufacturing environments, sometimes adoption of a partial outsourcing policy can help managers to partially release a portion of workloads from the production equipment, smoothing machine utilization and production operation/schedule, and reducing the potential overtime cost
With the aim of providing sound analytical information to help managerial decision making on the optimal outsourcing policy, this study constructs a hybrid production-outsourcing model to explore the optimal replenishment lot-size and shipment problem for an intra-supply chain system with a partial outsourcing policy and random scrap
Summary
Operating in competitive globalized markets, management of today’s transnational enterprises constantly searches for different alternatives in order to maintain product quality, streamline production activities, and reduce overall operating costs, in their internal supply chain system. With the aim of providing sound analytical information to help managerial decision making on the optimal outsourcing policy, this study constructs a hybrid production-outsourcing model to explore the optimal replenishment lot-size and shipment problem for an intra-supply chain system with a partial outsourcing policy and random scrap. The objective of this study is to simultaneously determine an optimal fabrication lot size and shipping frequency decisions that minimize the overall expected costs for such an intra-supply chain system. Mathematical modeling and optimization methods are used to solve the problem, and through the use of a numerical example and sensitivity analyses various important insights with regard to the joint effects of the partial outsourcing policy and random scrap on the optimal solutions are revealed to support managerial decision makings
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