Centralized Supply Chain Research Articles

Optimal Operation for Green Supply Chain in Consideration of Collection Incentive and Quality for Recycling of Used Products

In recent years, for the purpose of solving the problem regarding environment protection and resource saving, certain measures and policies have been promoted to establish a green supply chains (GSC) with material flows from collection of used products to reuse of recycled parts in production of products. In this study, we propose an optimal operation of the GSC while considering the collection incentive of the used products and quality for recycling of used products. Two types of decision-making approaches are used for product quantity, collection incentive of used products and lower limit of quality level of reusable parts in the used products for recycling in the GSC. One is the decisionmaking under an independent policy in decentralized supply chains where a retailer and a manufacturer make decisions so as to maximize profits individually. The other is the decision-making under a cooperative policy in centralized supply chains where a retailer and a manufacturer make decisions cooperatively so as to maximize the whole system’s profit. Additionally, we also discuss supply chain coordination as a manufacturer-retailer partnership based on profit sharing. Furthermore, we show the effect of the quality of the reusable parts on the optimal decisions. The collection incentive of the used products was found to bring more profitability to the GSC activity.

A bi-objective stochastic programming model for a centralized green supply chain with deteriorating products

In recent years consumers and legislation have been pushing companies to design their activities in such a way as to reduce negative environmental impacts more and more. It is therefore important to examine the optimization of total supply chain costs and environmental impacts together. However, because of the recycling of deteriorated items, the environmental impacts of deteriorating items are more significant than those of non-deteriorating ones.The objective of this paper is to develop a stochastic mathematical model and to propose a new replenishment policy in a centralized supply chain for deteriorating items. In this model, we consider inventory and transportation costs, as well as the environmental impacts under uncertain demand. Several transportation vehicles producing various greenhouse gas (GHG) levels are considered. The best transportation vehicles and inventory policy are determined by finding a balance between financial and environmental criteria. In this way, we develop a linear mathematical model and present a numerical example from the real world to demonstrate its applicability and effectiveness. We then perform a sensitivity analysis and provide some managerial insights. Finally, more promising directions are suggested for future research.

Determining consignment inventory strategy for a vendor and multiple buyers using a hybrid metaheuristic algorithm

This paper considers a centralized supply chain with consignment inventory (CI) system, where a vendor keeps a finished product and supplies it at the same price to multiple buyers. CI is a process where the buyer pays with delay for the goods supplied by the vendor. Considering the time value of money, this study compares two types of delay in payment in CI, which have been rarely considered (real use and order to order). Furthermore, two different metaheuristic algorithms, genetic algorithm (GA) and a hybrid algorithm, containing GA and particle swarm optimization algorithm, are used to maximize the supply chain net profit and calculate the proper values. Finally, a sensitivity analysis is performed to examine the effects of each parameter on the total net profit. Moreover, by applying a paired t-test, a comparison is made between two types of CI system and also between GA and the hybrid algorithm.

Coordination of supply chains with a flexible ordering policy under yield and demand uncertainty

This paper studies a flexible ordering policy among a manufacturer and a supplier with random yield and demand uncertainty, where the order quantity lies between the minimum and the maximum quantity. We first determine the optimal flexible ordering policy and the corresponding raw material production quantity that maximize expected profit of the centralized supply chain, and find that our flexible ordering policy can significantly enhance the supply chain's expected profit compared to an invariable ordering policy. Then we analyze the decentralized scenario and propose a revenue sharing policy with an order penalty and rebate (OPR) contract to fully coordinate the supply chain. Finally, numerical examples are given to illustrate the results.

Improving the supply chain of motor pumps to accelerate mechanized small-scale private irrigation in Zambia

During the past decade, smallholder groundwater irrigation with motor pumps has increased considerably in Zambia. This study analyzes an important but hitherto ignored factor for adoption: the supply chain of imported motor pumps. The main obstacles for farmers are identified as: the highly centralized supply chain and financing facilities in urban hubs; lack of information about prices, which vary significantly for the same make and model of pump; lack of information and training on proper use and maintenance; and lack of financing facilities. The Zambia National Farmers Union seems best placed to remove these obstacles.

Scheduling and lot sizing models for the single-vendor multi-buyer problem under consignment stock partnership

We consider a centralized supply chain composed of a single vendor serving multiple buyers and operating under consignment stock arrangement. Solving the general problem is hard as it requires finding optimal delivery schedule to the buyers and optimal production lot sizes. We first provide a nonlinear mixed integer programming formulation for the general scheduling and lot sizing problem. We show that the problem is NP-hard in general. We reformulate the problem under the assumption of ‘zero-switch rule’. We also provide a simple sequence independent lower bound to the solution of the general model. We then propose a heuristic procedure to generate a near-optimal delivery schedule. We assess the cost performance of that heuristic by conducting sensitivity analysis on the key model parameters. The results show that the proposed heuristic promises substantial supply-chain cost savings that increase as the number of buyers increases.

The Impact of Modular Assembly on Supply Chain Efficiency

This paper studies the impact of modular assembly on supply chain efficiency. In the modular assembly approach, a manufacturer acquires pre-assembled modules from its suppliers, rather than the individual components, as in the traditional assembly approach. We analyze the competitive behavior of a two-stage modular assembly system consisting of a manufacturer, and a supplier who pre-assembles two components into a module. The firms can choose their own inventory policies and we show the existence of Nash equilibrium in the inventory game. Moving from the traditional to the modular approach has a two-fold effect on the supply chain. First, we investigate the effect of centralizing the component suppliers. It can be shown that when there is no production time shift, the module supplier always holds more component inventories than suppliers do in the traditional approach, which yields a lower cost for the manufacturer. However, the suppliers, and therefore the supply chain may incur a higher cost in the modular approach. Second, we study the effect of a shift in production time from the manufacturing stage to the supplier stage. From numerical studies, it has been found that such a lead time shift always benefits a centralized supply chain, but not necessarily so for a decentralized system. Combining the two effects, we find that the modular approach generally reduces the cost to the manufacturer and the supply chain, which explains the prevalence of modular assembly from the perspective of inventory management. These results also provide some insight into how firms can improve supply chain efficiency by choosing the right decision structure and lead time configuration.

Supply chain coordination with stock-dependent demand rate and credit incentives

In this paper, we consider a supply chain which consists of a single manufacturer and a single retailer with a single product type. Demand is assumed to be dependent on the retailer's stock level. Without coordination, the retailer determines its order quantity to maximize its own profit, which is usually smaller than the manufacturer's economic production quantity. Three coordination policies are presented to coordinate the manufacturer's and the retailer's decisions. First, the credit period policy and the quantity discount policy are developed and the total profits under the two policies are compared. Then we develop a centralized supply chain policy and show that there is a unique optimal order quantity to achieve a perfect coordination. The centralized supply chain can get higher or equal channel profit while the credit period policy and the quantity discount policy are easier to achieve. Numerical examples are provided to illustrate the proposed policies.

Comparison of (s, S) and (R, T) Policies in a Serial Supply Chain with Information Sharing

It has been studied that retailer's using a suboptimal (R, T) policy is often more desirable to make the best use of information flows than the locally optimal (s, S) policy in a two-stage serial supply chain. In this paper, by performing an extensive computational study, we tabulate the benefit of the retailer's using (R, T) policy instead of (s, S) policy in a supply chain with information sharing, and compare it to a maximum possible benefit that could be achieved in a centralized supply chain. We can understand the mechanisms of how the cost parameters and demand variance affect the benefit of the retailer's using (R, T) policy instead of (s, S) policy, by comparing decentralized and centralized systems.

Joint Inventory and Cash Management for Multi-Divisional Supply Chains

Cash pooling is a powerful tool to consolidate intragroup liquidity for multi-divisional corporations. This paper develops a centralized supply chain model that aims to assess the value of cash pooling. The supply chain is owned by a single corporation with two divisions, where the downstream division (headquarter), facing random customer demand, replenishes materials from the upstream one. The downstream division receives cash payments from customers and determines a system-wide inventory replenishment and cash retention policy. We consider two cash management systems that represent different levels of cash concentration. For cash pooling, the supply chain adopts a financial services platform which allows the headquarter to create a corporate master account that aggregates the divisions' cash. For transfer pricing, on the other hand, each division owns its cash and pays for the ordered material according to a fixed price. Comparing both systems yields the value of adopting such financial services. We prove that the optimal policy for the cash pooling model has a surprisingly simple structure -- both divisions implement a base-stock policy for material control; the headquarter monitors the corporate working capital and implements a two-threshold policy for cash retention. Solving the transfer pricing model is more involved. We derive a lower bound on the optimal cost by connecting the model to an assembly system. Our results show that the value of cash pooling can be very significant when demand is increasing (stationary) and the markup for the upstream division is small (high). Nevertheless, a big portion of the pooling benefit may be recovered if the headquarter can decide the optimal transfer price and the lead time is short.

Scheduling and co-ordination of multi-suppliers single-warehouse-operator single-manufacturer supply chains with variable production rates and storage costs

We study a supply chain scheduling and co-ordination problem comprising multiple suppliers, a single warehouse operator, a single manufacturer, and multiple retailers, where the supply chain has limited production capacity that can take only some of the orders from the retailers. For a decentralised supply chain, the manufacturer is a decision maker that selects the orders and aims to maximise its own profit, where the profit is a function of the order storage time and storage quantity, order sequence-dependent weighted storage costs, and idle time of the orders. On the other hand, for a centralised supply chain, a supply chain co-ordinator exists that aims to maximise the profit of the whole supply chain and allocates the profit among the supply chain members. We first formulate the problem as a two-machine common-due-window flow shop scheduling problem. We then develop a theorem and two algorithms to solve the optimal scheduling problems in both the decentralised and centralised supply chains. With these results, we develop a method that can achieve channel co-ordination based on a profit sharing rule, together with an increase in the production rates and a decrease in the storage costs.

Centralised supply chain planning at IKEA

PurposeThe purpose of this paper is to analyse the prerequisites and effects of centralised supply chain planning at IKEA, and to explore how the planning process, planning system, and planning organization make up a centralised planning approach.Design/methodology/approachThe paper is based on a longitudinal case study of IKEA's implementation of global supply chain planning. The literature review generated a framework which identifies prerequisites for, approaches to, and the effects of and obstacles to centralised supply chain planning. This framework was used to analyse IKEA's supply chain planning before and after the implementation. Finally, the authors reflected upon the learning from IKEA and refined the framework.FindingsA number of prerequisites for centralised supply chain planning were identified: functional products, vertical integration, a dominating organization possessing the power and competence to enforce the implementation, and the use of one planning domain possessing all critical planning information. The direct effects of centralised supply chain planning were related to supply chain integration, standardisation, specialisation, and learning effects. Implementing centralised supply chain planning in an appropriate planning context led to several operational performance improvements. Obstacles were mainly related to human and organizational, as well as to software and data issues.Research limitations/implicationsThis is a first approach towards development of a framework of how to design, use and benefit from centralised supply chain planning. The developed conceptual model, which is refined through the case study, offers some generalizability in researching centralised supply chain planning.Practical implicationsThe findings show that centralised supply chain planning is a necessity for a large and growing, global supply chain striving for low‐cost production and efficiency.Originality/valueIKEA is a unique case with its supply chain characteristics and recently implemented planning concept.

TRANSSHIPMENTS IN HAZARDOUS ENVIRONMENTS: COOPERATIVE VERSUS NONCOOPERATIVE QUALITY CONTROL GAME

We address quality control of products undergoing multiple transshipment stages handled by different parties. Depending on the transportation modes, the stages may expose the products to hostile environments, such as extreme temperatures, which could influence quality. We incorporate the effect of quality on demand with the Neyman–Pearson statistical framework to study the effect of intra-competition between supply chain parties on inspection policies and thereby product quality. Specifically, we compare these policies with that of a centralized supply chain, where a single decision maker chooses the optimal inspection policies for all stages. We find that in terms of inspection policy, a party with the higher probability of nonconformance tends to inspect less under competition compared to the system-wide optimal inspection policy. Conversely, the other party may inspect more than under the system-wide optimal policy. We determine when intra-competition impacts conformance quality so that regulations are of particular importance for protecting consumers.

Price competition model in decentralized and centralized supply chains with demand disruption

Purpose: The paper studies the price competition of a supply chain with one supplier and two competing retailers under occasional demand disruption. Design/methodology/approach: The supply chain is either decentralized or centralized. The demand disruption for two retailers occurs with different probability. We analyze the effect of occurrence probability of demand disruption on the optimal prices of the supplier and two retailers. Findings: We find that the profits of supplier, retailers and supply chain are decreasing with the occurrence probability of demand disruption. Originality/value: It is helpful for supply chain members to adjust the original contracts to demand disruption.

The incentive effect of acceptance sampling plans in a supply chain with endogenous product quality

AbstractThis article studies a firm that procures a product from a supplier. The quality of each product unit is measured by a continuous variable that follows a normal distribution and is correlated within a batch. The firm conducts an inspection and pays the supplier only if the product batch passes the inspection. The inspection not only serves the purpose of preventing a bad batch from reaching customers but also offers the supplier an incentive to improve product quality. The firm determines the acceptance sampling plan, and the supplier determines the quality effort level in either a simultaneous game or a Stackelberg leadership game, in which both parties share inspection cost and recall loss caused by low product quality. In the simultaneous game, we identify the Nash equilibrium form, provide sufficient conditions that guarantee the existence of a pure strategy Nash equilibrium, and find parameter settings under which the decentralized and centralized supply chains achieve the same outcome. By numerical experiments, we show that the firm's acceptance sampling plan and the supplier's quality effort level are sensitive to both the recall loss sharing ratio and the game format (i.e., the precommitment assumption of the inspection policy). © 2013 Wiley Periodicals, Inc. Naval Research Logistics, 2013

Research on the Fresh Agricultural Product Supply Chain Coordination with Supply Disruptions

This paper develops a dynamic model in a one-supplier-one-retailer fresh agricultural product supply chain that experiences supply disruptions during the planning horizon. The optimal solutions in the centralized and decentralized supply chains are studied. It is found that the retailer’s optimal order quantity and the maximum total supply chain profit in the decentralized supply chain with wholesale price contract are less than that in the centralized supply chain. A two-part tariff contract is proposed to coordinate the decentralized supply chain with which the maximum profit can be achieved. It is found that the optimal wholesale price should be a decreasing piecewise function of the final output. To ensure that the supplier and the retailer both have incentives to accept the coordination contract, a lump-sum fee is offered. The interval of lump-sum fee is given leaving both the supplier and the retailer better off with the two-part tariff contract.

Quantity Discount Supply Chain Models with Fashion Products and Uncertain Yields

This paper explores the quantity discount coordination models in the fashion supply chain with uncertain yields and random demand. The paper proves that, under the independent and noncoordinated decision patterns, there exists a Nash equilibrium between the supplier and the manufacturer which reduces the supply chain's profit margin. In order to achieve the “optimal” centralized supply chain expected profit margin, new quantity discount models have been established. Both the supplier-oriented and the manufacturer-oriented Stackelberg supply chain gaming models are investigated. Our analytical and numerical analyses show that the quantity discount contract proposed in this paper can largely reduce the negative influence brought by the uncertainty of yields and demand. Therefore, the profit margin of supply chains based on quantity discount can reach the optimal level of the supply chain under the centralized setting.

Coordination in a Single-Retailer Two-Supplier Supply Chain under Random Demand and Random Supply with Disruption

This paper studies the coordination issue of a supply chain consisting of one retailer and two suppliers, a main supplier and a backup supplier. The main supplier’s yield is subject to disruption and the retailer faces a random demand. We determine the retailer’s optimal ordering policy and the main supplier’s production quantity that maximize expected profit of the centralized supply chain. We also analyze the decentralized scenario, and a combination of overproduction risk sharing and buy-back contracts with a side payment from/to the backup supplier is provided to coordinate the supply chain. Numerical examples are given to gain some qualitative insights.

Vendor-managed inventory models for items with imperfect quality

In this paper, two models for supply chain under VMI settings are developed when the incoming lot of items contains a fraction of non-conforming items. The first model is for a decentralised case where the vendor’s profit is maximised. However, there is significant extra profit to be realised by optimising the performance of the entire supply chain. Therefore, another model for centralised supply chain under VMI configuration is introduced. This model seeks to optimise the system total expected profit. The additional profit realised by implementing the integrated solution is distributed between vendor and retailer. The distribution scheme is according to some weight such that no party obtains less profit than that generated by decentralised VMI model. Usually, this weight reflects the bargaining positions of the vendor and retailer. The optimal solutions are characterised by finding all Karush-Kuhn-Tucker points of the profit functions. Based on these Karush-Kuhn-Tucker points, efficient algorithms are devised to solve the models.

Tactic of Supply Chain Coordination when the Freight Cost of Unit Product is Sensitive to Lot Size

Considering a supply chain with a manufacturer and a wholesaler, we assume the freight cost of unit product is sensitive to lot size and the manufacturer is responsible for product delivery, the optimal lot size models under decentralized decision and centralized supply chain are presented. The analytical result shows that the more flexible the delivery capacity is, the smaller the optimal production size is, which is consistent with short order lead time and small lot size that claimed by the wholesaler. Therefore, the manufacturer can quickly respond to demand of the wholesaler under the condition that the total cost is invariable. Moreover, when the delivery capacity isn’t absolute flexibility, the manufacturer may motivate the wholesaler to undertake product delivery through reducing the transfer price so that the wholesaler’s optimal order size under decentralized supply chain is closer to both the manufacturer’s optimal production size and the entire supply chain’s optimal size under centralized supply chain, which may benefit the entire supply chain since both can obtain a win-win solution.