Multi-echelon service models for inventory systems under different rationing policies

In this paper we model the service performance of two-echelon divergent production networks consisting of one central stock-point feeding a number of end stock-points where the external demand is realized. The systems we consider allow all stock-points to hold inventory and use periodic review ordering policies at all levels. Whenever the lower echelon has insufficient inventory to cover all upper echelon requisitions some policy to ration the available material is needed. Concentrating on one push and one pull rationing policy, we explore the system dynamics and develop models for three popular measures of the system service performance. All models make use of non-dimensional ratios which drastically reduce the number of parameters involved. Although these models are only approximate, numerical and simulation results demonstrate the adequacy of the approximations involved.     

An empirical investigation of antecedents to information exchange in supply chains

In this investigation, following the principal-agent theory, possibilities to reduce existing information asymmetries are derived and their effects on the information exchange are examined. Results of an empirical investigation based on a structural equation model confirm that monitoring measures and frequent meetings positively influence the exchange of information while explicit contracts have rather negative effects. Premiums and specific investments, however, seem to play insignificant roles. Measures, such as building a reputation mechanism, will probably prove to be effective only in the long run.     

The impact of supply base complexity on disruptions and performance: the moderating effects of slack and visibility

In the face of increasing supply base complexity, organisations have to develop new ways to manage or mitigate risk. This paper investigates the impact of four dimensions of complexity on the frequency of disruptions and plant performance. We apply insights from organisational information processing theory to understand how organisations can mitigate against the impact of more frequent disruptions. We test the moderating effects of slack resources as a means to absorb the effects of disruptions and supply visibility as a means to improve the ability to handle disruptions. The model is tested with data from 264 supply chain management professionals. Our findings broadly support the original hypotheses and suggest that supply base complexity can increase the frequency of disruptions and reduce plant performance but that slack resources and visibility can help to mitigate the effects. The study offers valuable insights into the management of supply base complexity.     

Roles of inventory and reserve capacity in mitigating supply chain disruption risk

This research focuses on managing disruption risk in supply chains using inventory and reserve capacity under stochastic demand. While inventory can be considered as a speculative risk mitigation lever, reserve capacity can be used in a reactive fashion when a disruption occurs. We determine optimal inventory levels and reserve capacity production rates for a firm that is exposed to supply chain disruption risk. We fully characterise four main risk mitigation strategies: inventory strategy, reserve capacity strategy, mixed strategy and passive acceptance. We illustrate how the optimal risk mitigation strategy depends on product characteristics (functional versus innovative) and supply chain characteristics (agile versus efficient). This work is inspired from a risk management problem of a leading pharmaceutical company.     

Integrated inventory valuation in multi-echelon production/distribution systems

The pressure to reduce inventory has increased as competition expands, product variety grows, and capital costs increase. This investigation addresses the problem of inventory quantification and distribution within multi-echelon supply chains under market uncertainty and management flexibility. This approach is based on an optimisation model emphasising demand uncertainty and the relevant dimensions of network design as number of echelons, lead time, service level, and cost of processing activities. Overstock quantification enables the understanding of inventory level sensitivity to market uncertainty. A comparison among production sites and storage facilities revealed that higher downstream overstock levels decrease upstream echelons of uncertainty exposition. The contribution of this study relies on management's ability to establish inventory targets for each stocking point according to risk exposure and to promote the optimisation of working capital. Overall, this investigation increases knowledge related to the treatment of demand uncertainty in flexible and integrated supply chains     

A survey of semiconductor supply chain models Part II: demand planning,inventory management,and capacity planning

Part I of this three-part series described semiconductor supply chains from the decision-making and functional perspectives, using this as a framework to review the industrial engineering and operations research literature on the problems arising in these supply chains. Part I then reviewed the literature on Strategic Network Design, supply chain coordination, sustainability and simulation-based decision support. This paper, Part II, reviews the areas of Demand Planning, Inventory Management and Capacity Planning in semiconductor supply chains. Part III concludes the series by discussing models to support Master Planning, Production Planning and Demand Fulfilment in this industry.     

The impact of the customer order decoupling point on type and level of supply chain integration

Literature suggests that more supply chain (SC) integration increases of SC performance. However, recent research shows that contextual factors affect the effectiveness of SC integration efforts. Specifically, the location of the customer order decoupling point (CODP) might be such a factor, but there is limited empirical evidence. This study explores the impact of the location of the CODP on SC integration. It empirically investigates upstream, internal and downstream SC integration efforts in twelve metal parts producing Dutch companies to offer a comprehensive view of the effects of the location of the CODP on SC integration. Our results show a clear relationship between SC integration and the location of the CODP. Specifically, make-to-order (MTO), assemble-to-order (ATO) and make-to-stock (MTS) companies show relatively high levels in upstream, internal and downstream SC integration, respectively. Moreover, MTO companies mainly share forecast information and engage in joint R&D with their suppliers, ATO companies focus on internal SC integration using information systems and planning, while MTS companies interact with their customers intensively to exchange forecast information. Our study adds to the insight on the application of SC integration in different situations and offers initial evidence for the effects of the location of the CODP on SC integration.     

Multi-period channel coordination in vendor-managed inventory for deteriorating goods

This study examines the problem of optimally dynamic joint decisions, including replenishment scheduling/quantity, retail price, wholesale price, and revenue-sharing allocation, in a vertically decentralised single-manufacturer Stackelberg and single-retailer channel over a multi-period planning horizon, subject to deteriorating goods and multivariate demand function. This study uses a calculus-based formulation combined with dynamic programming techniques to solve the channel coordination decision problem. Additionally, three arrangements, namely price-only contract, revenue-sharing contract, and revenue-sharing plus linear rebate and side-payment contract for channel coordination, are developed under retailer-managed inventory (RMI) and vendor-managed inventory (VMI) systems, respectively. The analysis reveals that the proposed policy under the VMI system with the revenue-sharing plus linear rebate and side-payment contract tends to obtain low retail prices and large demand quantity, and results in near-perfect coordination, including greater system efficiency and Pareto improvements, for the vertically decentralised dynamic channel.     

Effects of social capital on operational performance: impacts of servitisation

Studies on servitisation have largely overlooked the roles of social capital with suppliers and knowledge management. We propose a moderated mediation model to investigate the impacts of servitisation on the mechanisms through which social capital with suppliers improves operational performance. The hypotheses are empirically tested using structural equation modelling and data collected from 276 manufacturing firms in China. The results show that social capital improves operational performance both directly and indirectly through knowledge management, and the relationships are influenced by servitisation. In particular, social capital improves operational performance directly and indirectly through knowledge combination in servitised firms, whereas social capital only improves operational performance indirectly through knowledge acquisition in traditional manufacturers. The findings contribute to the literature by revealing that the effects of social capital with suppliers on operational performance are partially mediated by knowledge acquisition and knowledge combination and the mediation effects are moderated by servitisation, and by providing insights into how to design purchasing and production systems to profit from servitisation.     

Joint pricing and inventory strategies in a supply chain subject to inventory inaccuracy

This paper focuses on pricing strategies, inventory policies for a supply chain when Radio Frequency Identification (RFID) technology is adopted to cope with inventory inaccuracy. The supply chain consists of one supplier and one retailer, in which the RFID tag price is shared between the supplier and the retailer. We present and compare the performance differences between a wholesale price contract and a consignment contract when the retailer is the Stackelberg leader and the supplier is the follower. Based on the optimal pricing and inventory decisions, an interesting observation of contract selection is that there are two critical values of inventory available rate such that when the inventory availability is less than the lower value, both the supplier and the retailer prefer a consignment contract; when the inventory availability is greater than the upper value, a wholesale price contract is their best choice; when the inventory availability is between the two values, the supplier prefers a wholesale price contract and the retailer prefers a consignment contract. Additionally, there exist threshold values of RFID tag price and sharing rate to determine the contract preference for the retailer. Furthermore, the profits of both the supplier and the retailer are independent of the RFID tag price sharing rate in a wholesale price contract, and the supplier has the incentive to invest in RFID tag cost in a consignment contract.     

Supply chain models with corporate social responsibility

Currently, corporate social responsibility (CSR) has become a critical issue because more than 88% of consumers think companies should try to achieve their business goals while improving society and the environment. This paper focuses on a CSR supply chain where an Original Equipment Manufacturer’s (OEM’s) sales can be significantly reduced because of its oversea supplier’s social misconduct. Specifically, as in a conventional wholesale price contract the supplier determines its wholesale price and the OEM decides its order quantity, but in a CSR supply chain, the supplier can autonomously change its CSR cost once a minimum requirement is satisfied. A higher CSR cost means that the supplier invests more in its corporate social responsibility and the OEM’s sales will be less likely to be influenced by negative CSR events. The equilibrium solutions show an important dilemma – although the supplier’s profit increases in the basic CSR requirement, the supplier will always use the minimum CSR cost under the conventional wholesale price contract, which eventually leads to a low supply chain profit. Thus, we introduce two different contracts to handle this problem: the flexible quantity contract and the wholesale price incentive contract, which are, respectively, a ‘tough’ way and a ‘beneficent’ way for the OEM to solve the problem. Although the two ways cannot (always) coordinate the supply chain, we show that they both will significantly improve the supply chain performance. Our results also show that in some conditions, one strategy will dominate, whereas in different conditions the other strategy dominates.     

A supply chain model with vendor-managed inventory,consignment, and quality inspection errors

This paper considers the integration between quality control and production inventory control in supply chain management. Specifically, we study the effect of inspection errors on the costs incurred in a supply chain system with a single vendor and multiple buyers. In this system, the vendor enters into a vendor-managed inventory (VMI) and a consignment stock (CS) partnership with several buyers. We assume that the items made by the vendor are not in perfect quality, but they contain a given proportion of defective units. We also assume that quality inspection of these items by the buyers is subject to sampling errors. Three cases indicating to different levels of supply integration are considered: VMI–CS system, traditional system and integrated system. For each case, a mathematical model is formulated, an optimum solution is developed, and a numerical example is solved.     

Threats and benefits of power discrepancies between organisations: a supply chain perspective

The discrepancy of power between organisations has raised concerns over the abuse of power in inter-organisational relationships, especially in the supply chain where parties often have different power positions. In this study, we develop and test a model that explains how the less powerful party may react to different forms of power exercised by the power source. Nowadays, customers are typically more powerful than manufacturers in supply chains. Specifically, based on data from 617 manufacturers representing various organisational sizes and industries, we examine the impact of customer coercive and expert power on the manufacturer’s information sharing behaviours (information systems and content) as well as the performance implications for both the manufacturer and the customer. Structural equation modelling reveals that customer expert power positively predicts the establishment of information systems and the extent to which information is actively shared. In contrast, customer coercive power is negatively associated with the establishment of information systems, while it is positively related to information content. Information systems, in turn, predict the extent to which information is effectively exchanged, which ultimately relates positively to flexibility and delivery performance. Flexibility performance is positively related to financial performance, while delivery performance is not. Taken together, these findings enrich our understanding of inter-organisational power dynamics by offering important insights into differential reactions that the power target may choose to counter power imbalances.     

Mapping the future of supply chain management: a Delphi study

Supply chain management, a field that developed from business practice and research, is undergoing a major transformation. It is changing from tactical in nature (where the major focus is on cost and delivery) to a field that is strategic in nature. However, the future issues and challenges facing managers and executives are just now becoming understood. This paper reports these issues by drawing on the findings generated by a three-phase study consisting of a literature review, a two-round Delphi study, and a workshop. Unique in this Delphi study is that it brings together leading practitioners in supply chain management with leading supply chain management researchers. The findings show that while the focus of the current tactical supply chain view is relatively limited to issues of delivery, risk, and leadership, the supply chain view of the future (i.e., five years from now) is more complex and demanding. The findings also show that there is generally no difference between researchers and practitioners in terms of how they view the issues. Finally, the study uncovers major obstacles that must be resolved before the strategic potential of future-state supply chains can be realised.     

A comparison of supply chain vulnerability indices for different categories of firms

Given the high vulnerability of today's supply chains to disruptions, measuring and managing supply chain vulnerability has become critical. In the attempt to support practice in reducing supply chain vulnerability, we (1) discuss and define the concept of supply chain vulnerability and (2) measure and compare supply chain vulnerability for various categories of firms. Normal Accident Theory and High Reliability Theory provide the theoretical foundations for the empirical study, and graph modelling is the method used to construct a measure for supply chain vulnerability. The empirical data largely confirm that there is a negative relationship between supply chain vulnerability and supply chain performance, a positive relationship between structural categories (firm size and production type) and supply chain vulnerability, and a positive relationship between supply chain vulnerability and managerial categories (logistics importance, supply chain risk planning, and supply chain risk management).     

A fractal perspective-based methodological framework for supply chain modelling and distributed simulation with multi-agent system

With the development of global economy, supply chain, as a recognised complex system, is becoming more complex for analysis. In this context, it is worth introducing the perspective of complex system in perceiving and modelling of supply chain system to address its dynamic, stochastic and uncertain characteristics. Therefore, this paper proposes a methodological framework of supply chain modelling and simulation based on the fractal perspective, and presents an all-round and systematic exposition of concept modelling and distributed simulation by means of multi-agent technology. In this framework, different supply chain scenarios focusing on manufacturing, inventory and transportation can be easily modelled and simulated at different scales and levels. In addition, a prototype system which implements the methodological framework and the key implementation techniques are presented as well. Finally, a supply chain example, which supposes manufacturer as the core member, is modelled and simulated with the prototype system to illustrate the effectiveness of the proposed framework.     

Consignment and vendor managed inventory in single-vendor multiple buyers supply chains

In this paper we model a consignment (CS) and vendor-managed inventory (VMI) policy for a single vendor and multiple buyers supply chain with known demand. We study three vendor–buyers partnerships: (i) the vendor and the buyers act independently, (ii) the vendor enters in a vendor-managed inventory consignment (VMI&CS) partnership with the buyers and (iii) the vendor and the buyer belong to a vertically integrated firm where a single decision maker decides about the ordering policies. We use relationships (i) and (ii) to study the benefits of the VMI&CS agreement. We provide analytical and numerical results. We find that such an agreement is more beneficial when the vendor has a flexible capacity. It is also more attractive to buyers when they have significant order costs and the vendor's setup cost is not large. Finally we find that under VMI&CS the vendor will tend to make more frequent shipments with smaller lots.     

Integrated inventory models with fuzzy annual demand and fuzzy production rate in a supply chain

The successful implementation of Just-in-time (JIT) production in today's supply chain environment requires a new spirit of cooperation between the buyer and the vendor. An integrated inventory model with such a consideration is based on the total cost optimization under a common stock policy and business formula. However, the supposition of known annual demand in most related literature may not be realistic. This paper proposes the inclusion of fuzzy annual demand and/or the production rate, and then employs the signed distance, a ranking method for fuzzy numbers, to find the estimate of the common total cost in the fuzzy sense, and subsequently derives the corresponding optimal buyer's quantity and the integer number of lots in which the items are delivered from the vendor to the purchaser. Numerical examples are provided to illustrate the results of proposed models.     

Does collaboration pay in agricultural supply chain? An empirical approach

This paper examines the effect of different types of collaboration on the level of Postharvest Food Losses (PHFL) and the proportion of low-quality peaches produced using a unique data-set of Greek peach producers. Quantile regression techniques are adopted to estimate the effects at different points of the conditional distribution of our variables of interest. The findings of this study suggest that high levels of collaboration between producers and cooperatives are associated with both low levels of PHFL and a low proportion of low-quality peaches. We also find that specific types of collaboration, such as ‘goal congruence’, can play a significant role in reducing PHFL and improving the quality of peach production at the extremes of the distribution. Important policy implications regarding collaborative practices and systems that can be implemented to reduce PHFL and boost a producer’s performance together with sustainability credentials are drawn from this study.     

Warehouse location and two-echelon inventory management with concave operating cost

In this paper, we study a location–inventory network design problem which jointly optimises the warehouse location, the warehouse–retailer assignments, the warehouse–retailer echelon inventory replenishment and the safety stock-level decisions over an infinite planning horizon. The consideration of the facility operating cost, the safety stock cost and the two-echelon inventory cost results in an MIP model with several nonlinear terms. Due to the complex trade-offs among the various costs and multiple nonlinear terms in the model, traditional solution approaches no longer work for this problem. We outline a polymatroid cutting-plane approach based on the submodular property of the cost terms to address this problem. Computational results demonstrate that the cutting-plane method based on polymatroid inequalities can efficiently solve randomly generated instances with moderate sizes.