Delivery Lead Time Research Articles

Impacts of pre-sales service and delivery lead time on dual-channel supply chain design

Pre-sales service and delivery lead time in addition to sales price are crucial factors that affect customers’ purchase decisions in practice. In this paper, we incorporate these factors into our discussion and analyze the channel configuration strategy for a manufacturer who faces a market demand that is sensitive to price, pre-sales service, and delivery lead time. We investigate the impacts of the parameters related to pre-sales service and delivery lead time on the pricing/service/lead-time strategies and performance of the supply chain under centralized and decentralized settings. Our analysis shows that in the centralized supply chain, the manufacturer prefers the dual-channel structure when customer acceptance of the online channel is relatively high. In the decentralized case, however, this preference holds only if the retailer’s service cost factor is relatively large and service level sensitivity parameter and customer acceptance of the online channel are relatively low. An interesting finding is that in the centralized setting, pre-sales service level sensitivity does not always positively affect the retailer’s profit in the dual-channel structure, although it has a positive effect on the retailer’s price, pre-sales service level, and demand. However, this is not the case in the decentralized setting. We also find that the manufacturer in the decentralized setting adopts the online channel for strategic purposes to lower the retailer’s product price while maintaining the pre-sales service level. This can partially resolve the double-marginalization problem that increases the retailer’s channel efficiency. Finally, we find that our main results are robust for cases in which customer acceptance of the online channel is greater than that of the traditional channel and is affected by the delivery lead time.

B2C cross-border E-commerce logistics mode selection considering product returns

Long delivery lead times and costly transportation postage are significant characteristics of B2C cross-border e-commerce and logistics. They engender preference inconsistencies and reversals in customers, which can lead to product returns. The aim of this study is to enable retailers to select the optimal cross-border logistics mode that fulfils their marketing strategies while taking product returns into consideration. We propose a novel way to describe customer utility by incorporating customer time preferences, and construct three cross-border logistics models. The theoretical and numerical analyses indicate that, if retailers want to eliminate or reduce their product return rates, they can adjust their delivery lead times in each logistics mode under various product procurement and sales prices, commodity tariffs, international and domestic postage and operating costs. In particular, the O2O mode is always a better option for retailers than the O2D mode, and under certain conditions, the D2D mode is better for retailers than the O2O mode. To increase market demand, the O2O mode is optimal for retailers selling high-priced products, while the O2D mode is optimal for retailers selling low-priced products. This study also provides suggestions for overseas manufacturers. These findings are applicable to B2C cross-border e-commerce, cross-border logistics, and overseas production.

Asymptotically Optimal Lagrangian Policies for One-Warehouse Multi-Store System with Lost Sales

We consider a periodic-review inventory control problem for the Multi-Warehouse Multi-Store system with lost sales. We focus on a time horizon during which the system receives no external replenishment. Specifically, each warehouse has a finite initial inventory at the beginning of the horizon, which is then periodically allocated to the stores in each period in order to minimize the total expected lost-sales costs, holding costs, and shipping costs. This is a hard problem and the structure of its optimal policy is extremely complex. We develop simple heuristics based on Lagrangian relaxation that are easy to compute and implement, and have provably near-optimal performances. In particular, we show that the losses of our heuristics are sublinear in both the length of the time horizon and the number of stores. This improves the performance of existing heuristics in the literature whose losses are only sublinear in the number of stores. Numerical study shows that the heuristic performs very well. We also extend our analysis to the setting of positive delivery lead times.

A System Dynamics Approach Towards Analysis of Hybrid Make-to-Stock/Make-to-Order Production Systems

Hybrid Make-To-Stock (MTS)/Make-To-Order (MTO) production system benefits from both pure MTS and MTO systems and thus, is regarded as a valuable production system in order to respond today’s market conditions such as demand uncertainty, shortage of raw materials, and high inventory holding costs. Our purpose is to explore such systems over covering most of the influential factors that have not been taken into account so far. Hence, a system dynamics (SD) model is proposed in this study considering three different series of workstations (MTS, MTO, and MTS/MTO) in a manufacturing firm with a continuous production line. The performance of the developed model is assessed in terms of holding costs as well as product’s delivery lead-time. Moreover, this study considers the impacts of some significant, exogenous variables such as different outlays including operating expenses, holding costs, and the company’s net profit. The results show the superiority of our proposed model in contrast with previous studies in a cost-oriented point of view.

The impact of consumer behavior on preannounced pricing for a dual‐channel supply chain

AbstractThis study discusses a dual‐channel supply chain in which a manufacturer sells a regular‐priced product through dual channels in the normal sales period and only sells overstocked products through the direct channel in the discounted sales period in the presence of strategic consumers. The manufacturer acts as a Stackelberg leader to adopt a preannounced pricing policy. This study first proposes demand functions for a two‐period dual‐channel model by incorporating consumer utility functions. Based on the demand functions, optimal pricing strategies for both manufacturer and retailer are established. The results show that the manufacturer prefers to raise prices in both periods for consumers with a short delivery lead time. However, counterintuitively, the selling prices set by the manufacturer do not decrease as the degree of consumer patience increases. Finally, there is a Pareto zone under a certain condition where both the manufacturer and the retailer in the two‐period dual‐channel model outperform their counterparts in terms of profit in the single‐period dual‐channel model.

A coordination mechanism for supply chains with capacity expansions and order-dependent lead times

This paper considers a supply chain consisting of a retailer for short life cycle products facing stochastic customer demand and a manufacturer that initiates production upon receipt of retail orders. Departing from the common view of the newsvendor problem, we assume that the delivery lead time is not fixed, but that both the retailer and the manufacturer have the option to shorten it. Shorter lead times enable the retailer to place orders closer to the start of the selling season where additional information on customer preferences has become available, reducing demand uncertainty. In the work at hand, lead time is assumed to depend on the order quantity, on the supplier's production capacity, and a fixed transportation delay. This paper proposes a model for determining the optimal order quantity and production capacity in centralized and decentralized settings. For the uncoordinated case, we show that if the retailer's ability to gather and analyze additional demand information is revealed to the manufacturer, the arising information asymmetry between the two parties can aggravate the double marginalization effect and, in turn, erode supply chain efficiency. In a coordinated supply chain, however, both parties have an incentive to align both order quantity and investments in lead time reduction. To coordinate the decentralized supply chain, we propose a buy-back contract that helps to leverage supply chain profitability. We conclude with an outlook on future research opportunities.

Multi-objective particle swarm optimisation based integrated production inventory routing planning for efficient perishable food logistics operations

Sustainable and efficient food supply chain has become an essential component of one’s life. The model proposed in this paper is deeply linked to people's quality of life as a result of which there is a large incentive to fulfil customer demands through it. This proposed model can enhance food quality by making the best possible food quality accessible to customers, construct a sustainable logistics system considering its environmental impact and ensure the customer demand to be fulfilled as fast as possible. In this paper, an extended model is examined that builds a unified planning problem for efficient food logistics operations where four important objectives are viewed: minimising the total expense of the system, maximising the average food quality along with the minimisation of the amount of CO2 emissions in transportation along with production and total weighted delivery lead time minimisation. A four objective mixed integer linear programming model for intelligent food logistics system is developed in the paper. The optimisation of the formulated mathematical model is proposed using a modified multi-objective particle swarm optimisation algorithm with multiple social structures: MO-GLNPSO (Multi-Objective Global Local Near-Neighbour Particle Swarm Optimisation). Computational results of a case study on a given dataset as well as on multiple small, medium and large-scale datasets followed by sensitivity analysis show the potency and effectiveness of the introduced method. Lastly, there has been a scope for future study displayed which would lead to the further progress of these types of models.

Semiconductor wafer fabrication production planning using multi-fidelity simulation optimisation

Semiconductor wafer fabrication is a complicated and time-consuming production process in the semiconductor manufacturing industry. It is very important for the manufacturer to come up with production plans that can most efficiently utilise the manufacturing equipment and fulfil customer orders placed in a planning horizon. Because of the complexity of the manufacturing processes, it is necessary to use high-fidelity discrete-event simulations to provide accurate estimates of delivery lead time for any given production plan. However, high-fidelity simulations are time-consuming, and thus decision-makers may only evaluate a small number of production plans once customer orders are received. In this paper, we propose the use of a multi-fidelity simulation optimisation approach to efficiently evaluate and select the best production plan from a large set of alternative plans under consideration. We develop an open queue approximation model for a wafer fabrication system and then use the low-fidelity estimates of lead times obtained from the approximation model in a recently developed multi-fidelity simulation optimisation method. Simulation experiment results show that the multi-fidelity approach significantly improves the computational efficiency of simulation-based production planning.

Deciding on inventory allocation policies in the auto parts Brazilian distribution chain

The purpose of this paper is to evaluate the decision regarding whether to centralise or decentralise the stock of auto parts in Brazilian context. Extensive research was conducted regarding stock allocation policies, with a focus on centralisation and decentralisation, whereas the criteria for this decision were actually validated according to the opinion of Brazilian dealerships. A survey of 119 dealers revealed the important criteria for decision making using the analytic hierarchy process (AHP) approach. Our results demonstrate that dealerships assign high importance to delivery lead time, quality and flexibility in the delivery process from automakers. The results reveal that the simple trade-off between service level and inventory cost does not offer a definite distribution net design regarding stock allocation policies. This paper contributes by showing the criteria related to different types of stock allocations influence the decision regarding whether to centralise an auto parts' distribution chain in Brazil.

The length of the distribution channel as a factor of its efficiency

Distribution network is a system of activities that provide transfer of products between producers and final users. It is also known as distribution channel, marketing channel, distribution chain, distribution pipeline, market chain and trade chain. This network has two or more partners, so it has to be coordinated in the direction of order fulfilment and satisfied demand. As a partnership business network, distribution channels are very important, due to their role in responding to customers' requests. Distribution channels could provide competitive advantage for all partners along the network, through shorter delivery lead time and higher product availability. Although the main purpose of distribution channels is providing continuous flows of products to customers, they should be designed to fill customer's demand with minimum total cost. Determining the right number of facilities and proper locations for distribution network is an essential issue for companies involved in the channel. The issue of distribution channel's length has become more interesting due to the parallel existence of two different trends. On one hand, there is tendency for reducing number of partners, facilities or stages of distribution channels, with the purpose of avoiding extra expenses, but on the other hand there is a necessity to involve more partners in distribution channel, because that is a way for providing greater market share. Configuration of distribution channels depends on many factors. These factors have internal or external character. Therefore, the fact that the distribution of the same products in different countries can be performed completely differently is not surprising at all. In this regard, the aim of this papers is to classify the factors that affect the length of the distribution channel. In addition, the paper will also indicate advantages as well disadvantages of both long and short distribution channels. The goal of the analysis of the factors and the way of designing distribution channels, in terms of its length, is to make an adequate decision for increasing efficiency of the distribution network.

Dual Channel Supply Chain Model with Delivery Lead Time on The Imperfect Production Process by Notice Into Carbon Emission Capacity Regulation

The development of the internet, adds flexibility of supply chain with an online channel for the product distribution. In this research, the dual channel supply chain model is used on the imperfect production process by notice into carbon capacity regulation and also delivery lead time. We construct the model to maximize the system profit of one manufacturer and one retailer by considering a carbon emissions capacity constrain from the government. Furthermore, we determine the optimal solution with Karush Kuhn Tucker condition. Based on sensitivity analysis maximal profit is obtained when probability of defective product, delivery lead time sensitivity, and carbon emissions are minimal.

Heuristics for a multi-period facility location problem with delayed demand satisfaction

We investigate a recently introduced extension of the multi-period facility location problem that considers service-differentiated customer segments. Accordingly, some customers require their demands to be met on time, whereas other customers accept delayed deliveries as long as lateness does not exceed a pre-specified threshold. In this case, late shipments can occur at most once over the delivery lead time, i.e.an order cannot be split over several time periods. At the beginning of the multi-period planning horizon, a number of facilities are in place with given capacities. A finite set of potential facility sites with multiple capacity levels is also available. The objective is to find the optimal locations and the opening, resp.closing, schedule for new, resp.existing, facilities that provide sufficient capacity to satisfy all customer demands at minimum cost. In this paper, we propose four heuristics that construct initial solutions to this problem and subsequently explore their neighborhoods via different local improvement mechanisms. Computational results with randomly generated instances demonstrate the effectiveness of the proposed heuristics. While a general-purpose mixed-integer programming solver fails to find feasible solutions to some instances within a given time limit, the heuristics provide good solutions to all instances already during the constructive phase and in significantly shorter computing times. During the improvement phase, the solution quality is further enhanced. For more than one-fourth of the instances, the heuristic solutions outperform the best feasible solutions identified by the solver.

Joint order allocation and transportation planning under uncertainty within a socially responsible supply chain

PurposeThis paper aims to propose an integrated supplier selection, order allocation, transportation planning model, along with investment planning for corporate social responsibility (CSR), over a given multi-period horizon under uncertainty. Furthermore, a customer’s behavior to pay more money for items with CSR attributes is considered in the total market demand.Design/methodology/approachThe objective functions, i.e. social value of purchasing, total profit (TP), total delivery lead-time, total air pollution, total water pollution and total energy consumption with regard to a number of constraints are jointly considered in a multi-product system. It is worth noting that operational- and sustainable-related parameters are usually vague and imprecise in this area. Therefore, this paper develops a new fuzzy multi-objective optimization model to capture this inherent fuzziness in critical data.FindingsThrough the numerical examples in the textile industry, the application of the model and usefulness of solution procedures are carried out. The numerical results obtained from the proposed approach indicate the efficiency of the solution algorithm in different instances. Moreover, the authors observe that social investment of the buyer, to stimulate market demand, can affect the TP and also involve the total contribution of suppliers in social responsibility.Originality/valueThis research work concentrates on providing a procurement and inventory model through the lens of sustainability to enable textile supply chain managers and related industries to apply the approach to their inventory control and supply management. Totally, the proposed methodology could be applied by many fabric buyers of textile industry tackling purchasing issues and attempting to perfect understanding of social supply chains.

Indonesian High-Speed Railway Optimization Planning for Better Decentralized Supply Chain Implementation to Support e-Logistic Last Miles Distribution

E-logistics must have better strategy because they must satisfy unpredictable demands which came from customer. Other consumer behaviours which affect e-logistics must work more efficiently are the requirement of last miles fast delivery and more competitive pricing. Decentralized supply chain model can handle all these issues and complex logistics activity although it only has one echelon model in the supply chain structure. Decentralized supply chain model doesn’t need a distribution centre but requires inventory sharing policy. Key to success inventory sharing policy is low lead time delivery. In Indonesia, only two transportation type which can handle product in low lead time, i.e., train cargo and aircraft cargo. Train cargo still needs high lead time but has low operation cost. Aircraft cargo can handle product in low lead time but need high operation cost. The trade-off in this condition is e-logistics need low lead time transportation tenant to satisfy demand until last miles delivery but has low operation cost not as expensive as aircraft cargo. Indonesia is developing high-speed train which connects Jakarta to Surabaya. In this research, we will review the level of effectiveness high-speed train in Indonesia to realized decentralized supply chain distribution network for handling e-logistics last miles shipping using dynamic system simulation. The output of this research is efficiency review of Indonesian high-speed railway cargo to support decentralized e-logistics supply chain distribution network, compared by aircraft cargo. After we perform simulation using dynamic system simulation, delivery of products between regions by using fast train is declared feasible to deliver products with fast delivery type if in one day there are six departure time (delivery batch). If less than six departures, the railway is declared unfeasible to deliver products with fast delivery type. However, the train can save about 37% batch delivery when compared to cargo aircraft.

Delivery time dynamics in an assemble-to-order inventory and order based production control system

System dynamics play a critical role in influencing supply chain performance. However, the dynamic property of the assemble-to-order (ATO) system remain unexplored. Based on control theory, the inventory and order based production control system (IOBPCS) family, can be utilized as a base framework for assessing system dynamics. However, the underlying assumption in traditional IOBPCS-based analytical studies is that the system is linear and the delivery time to end customers is negligible or backlog is used as a surrogate indicator. Our aim is to incorporate customer delivery lead-time variance as the third assessment measure alongside capacity availability and inventory variance as part of the so-called ‘performance triangle’– capacity at the supplier, the customer order decoupling point (CODP) inventory and the delivery lead-time. Using the ‘performance triangle’ and adopting non-linear control engineering techniques, we assess the dynamic behaviour of an ATO system in the electronics sector. We benchmark the ATO system dynamics model against the IOBPCS family. We exploit frequency response analysis to ensure a robust system design by considering three measures of the ‘performance triangle’. The findings suggest delivery LT variance can be minimised by maintaining the ATO system as a true Push-Pull hybrid state with sufficient CODP stock, although increased operational cost driven by bullwhip and CODP variance need to be considered. However, if the hybrid ATO system 'switches' to the pure Push state, the mean and variance of delivery LT can be significantly increased.

Do Political Disruptions Affect Supply Chain Performance? A Qualitative Case Study of the Textile Supply Chain in Pakistan

This paper explores the interaction and impact of political disruptions on textile supply chain performance in Pakistan. A qualitative approach is adopted to explore the linkages and relationships between political disruptions and supply chain disruptions and performance. Semi-structured interviews were conducted at 25 different textile manufacturing firms. This study confirmed the prevalence of severe and variegated impacts of political disruptions on the textile supply chain. Supply chain disruption is found to be a key mediating factor that directly and indirectly affect supply chain performance through an increased production and delivery lead-time, transportation delays, interruptions of raw material supplies to plants and distributors and the restricted access to workplaces for suppliers and workers. The linkages are represented through vicious circles that illustrate the interactions and inter-relationships between disrupted supply chain and performance. This study provides empirical evidence to help government to formulate pertinent labour laws and industrial policy to mitigate political disruptions and minimise deleterious effects of supply chain disruption on production and distribution networks whilst respecting and protecting the democratic rights of people.

Determining the optimal customization levels, lead times, and inventory positioning in vertical product differentiation

In this paper we study a manufacturer's product line design decisions when selling customized products in a market where customers are heterogeneous with respect to valuation of product attributes. The product has two attributes based on which a consumer's product valuation is determined. The first attribute is customization level, defined by the extent to which consumers are involved in the value chain. The second attribute is delivery lead time which is influenced by the customization level. We consider a market that consists of two segments. Consumers in the first segment highly value customization level and are not as concerned with lead time. In contrast, customers in the second segment are very concerned with lead time and place less importance on customization level. Given such product and market characteristics, the manufacturer must make a choice whether to offer a single customized product or to exploit the benefits of market segmentation by offering two different customized products. Different from most existing work in the product line design literature that neglects the operational aspects attached to production, here we consider the pipeline and safety inventory positioning along the production processes which is interdependent with the customization level and lead time decisions. The model developed provides insights into the conditions under which the manufacturer should opt for the two-product strategy with two different customization levels or the one-product strategy with a single customization level. In particular, we show that considering pipeline inventory and safety stock costs generally leads to lower optimal customization levels, and that the two-product strategy is preferred in most cases.

Augmenting Fixed Framework Agreements in Humanitarian Logistics with a Bonus Contract

Framework agreements (FAs) are commonly used by relief organizations to cooperate with suppliers to pre‐position relief items. Many Chinese local authorities with disaster responding experience choose a specific type of FA, the fixed framework agreement (FFA), which contains fixed terms for item quality, quantity, price, and delivery lead time. These FFAs, however, do not fully motivate suppliers to further improve the effectiveness of a humanitarian logistics (HL) operation. We suggest using a bonus contract as a supplemental agreement to FFAs to incentivize suppliers to reduce delivery lead times. We develop a performance measurement model using deprivation level functions (DLFs) to measure effectiveness, efficiency and cost‐effectiveness of an HL operation. With this model, we quantify the performance of an FFA with and without bonus contract and study the feasibility and optimality of the bonus contract. A case study on an FFA observed in practice is used to illustrate our methodology. The results show that the bonus contract can be both practical and capable of improving the performance of an HL operation.

Exploring the insights of a consignment stock program implementation in a leagile supply chain

Supply chain performance, in terms of total cost, service level and delivery lead-time is an extremely important objective in an organization, being directly linked to inventory management. Therefore, well managed inventory is a main trigger to increasing profitability. In this regard, the present study attempts to explore the readiness of a leagile manufacturing company to embrace consignment stock model, in order to reduce inventory value for raw materials and packaging, as well as to avoid forecast accuracy problems and cash-flow issues. The methodology includes a brief analysis of different types of inventory models, focusing on consignment stock approach and proposes an exploratory case study, represented by a successful implementation of a consignment stock program in a multinational company, having already leagile prerequisites. Using as a basis the insights and learning from the real case, the aim of the study is to develop a business processes framework, accommodated with the IT support software, to serve as a guideline for future implementation of such programs.

Optimizing Offline and Online Selling Prices in a Monopolistic Environment

Based on two linear deterministic demand models, the sales revenue function of a multivariate quadratic form is formulated in this paper to determine the optimal offline and online selling prices for a retailer in a monopolistic environment. The impacts of the uniform delivery lead time on the retailer’s optimal pricing scheme and profitability are analytically examined. A numerical study is conducted to demonstrate these impacts.