A strategic model for exact supply chain network design and its application to a global manufacturer

This paper presents a comprehensive model that captures significant strategic decisions involved in designing or redesigning high-performance supply chains from the perspective of the manufacturer. The problem considers deterministic demand by multiple clients, for multiple products, over the periods of a long-term horizon. The design decisions involve selection of suppliers, establishment or resizing of production facilities and distribution centres, possible subcontracting of related activities, and selection of transportation modes and routes. The problem is formulated by a Mixed Integer Linear Programming model. Its objective is to minimise the overall costs associated with procurement, production, inventory, warehousing, and transportation over the design horizon. Appropriate constraints model the complex relationships among the links of the supply chain. The proposed model has been applied to a large case study of a global manufacturing firm, providing valuable insights into the transformation of the firm’s current supply chain network, as well as into the potential of the proposed approach.     

Towards optimal configuration of a manufacturer’s supply network with demand flexibility

Demand flexibility exhibits the degree to which customers are often willing to compromise on product features or performance levels for budgetary (reflected in price) or schedule (reflected in delivery) reasons. It is essential for a manufacturer to map demand flexibility into the supply side and investigate its impact on supply network configuration to maximise its total profit. This paper is among the first contributions that seek to address the challenge of optimal configuration of a manufacturer’s supply network that consists of raw material suppliers and contract manufacturers, considering demand flexibility and commonality among different product families. A new mixed integer programming model is developed to describe the characteristics of this problem. The objective was to maximise the manufacturer’s total profit subject to various operating constraints of the supply chain. In view of the complexity and non-deterministic polynomial-time (NP)-hard nature of the problem, a hybrid constraint programming and simulated annealing algorithm is proposed to solve the problem optimally. Extensive numerical studies are conducted to validate the effectiveness of the proposed model and the hybrid algorithm.     

A basic model for co-ordinating a four-level supply chain of a product with a vendor,multiple buyers and tier-1 and tier-2 suppliers

This paper investigates the co-ordination of order quantities amongst the players in a four-level supply chain with a centralised decision process. The first level of the supply chain consists of multiple buyers, the second level of a vendor (manufacturer), the third level consists of multiple tier-1 suppliers, and the fourth level consists of multiple tier-2 suppliers. Each supplier supplies one or more items that are components of the product produced by the manufacturer. The model developed in this paper guarantees that the local costs for the players either remain the same as before co-ordination, or decrease as a result of co-ordination. A mathematical model is developed, with numerical examples presented and results discussed.     

Optimal acquisition policy with quantity discounts and uncertain demands

We study the acquisition policy decision problem for a supply network involving one manufacturer and multiple suppliers. The manufacturer produces multiple products under uncertain demands and each supplier provides price discounts. The problem is to determine the manufacturer's acquisition policy and production levels so as to maximise the manufacturer's expected profit, subject to both the manufacturer's and suppliers’ capacities. We present a mixed integer nonlinear programming (MINLP) formulation of the problem, for both single- and multiple-sourcing procurement policies. General algebraic modeling system (GAMS) and its solvers, combining external integration functions, are employed to solve the complex MINLP problem. The preliminary computation results and managerial analysis are reported.     

The impact of dual-market on supply chain configuration for new products

Given a firm’s supply chain network, the key objective of supply chain configuration (SCC) is to determine a subset of supply chain partners to be involved in development, sourcing, production, distribution and support of a new product at the highest level of efficiency and expected responsiveness. Current literature on SCC realises the importance of considering the demand dynamics associated with the new product diffusion (NPD). However, these studies assume one-segment market for new products, a single homogenous consumer segment. Recent research in marketing indicates that such simplification might be fatal because a diverse and significant number of product categories may experience a dual-market structure, namely early and main markets, and generate a different demand dynamics. The objectives of this study are to: (i) develop a hybrid optimisation model, capturing both SCC decisions and the demand dynamics of dual-market NPD process; (ii) based on real-world data for a host of electronic product categories, various SCC networks and NPD demand dynamics, examine the new integrated optimisation model under one- and two-segment market; and (iii) present relevant managerial implications and guidelines for supply chain and marketing managers. Our extensive comparative computational experiment with 26 categories of consumer electronic products show that on average the relative net profit may improve significantly, when the market is considered as two-segment.     

The point of purchase decision in a supply chain with value-added reselling

We explore a stylised decision model in order to better understand the trade-offs inherent in locating the point of purchase on a supply chain. In simple terms, a supply chain can be visualised as a series of value-adding production stages where the end product becomes increasingly differentiated as it travels downstream. The manufacturer is responsible for all processing up to the point of purchase, whereas the buyer (a value-added reseller) is responsible for further processing up to the end of product completion. Product demand becomes more and more uncertain with each downstream stage resulting in ever larger errors in matching demand with supply. Our paper proposes an approach and a model for finding the best location for the interface between the manufacturer and buyer so that the buyer’s expected total profit is maximised, and explores how product characteristics such as configurability and lead time sensitivity of demand might impact the results.     

供应链上游段VMI模式的共赢条件

选取上游层面VMI模式各参与者为研究对象.考虑实施上游层面VMI模式后,订货(配送)主动权的转移导致订货(配送)策略的不同,以及制造商对各零部件需求速率的不同导致其对各零部件的订货周期也不一致的情况.通过建立数学模型,对实施上游层面VMI模式前后各企业的经济效益进行比较,探讨实施VMI且制造商销售价格不变时,各供应商是否存在合理的销售价格涨幅区间,该区间的价格既能弥补供应商因管理制造商零部件库存多消耗的成本,也能使各制造商和供应商的经济效益都有所提高,实现共赢,为各企业更加长久的合作提供理论依据.     

Supply chain risk assessment during new product development: a group decision making approach using numeric and linguistic data

Companies strive to minimise supply chain related risks during new product development as any glitch while developing new products can lead to considerable delay in product launch with severe financial implications. However, many organisations face difficulty in properly assessing the vulnerabilities of their globally dispersed supply chains during the product development stage as no suitable procedure for that purpose seems to be readily available in the literature. The present research is an attempt to fulfil this requirement. A step-by-step approach for supply chain risk assessment during new product development, involving group decision making, is suggested. This approach can use both numeric and linguistic data and helps in determining vulnerability scores for various sub-systems and for each supplier of the most vulnerable sub-system. This is followed by failure mode effect analysis (FMEA) which helps prioritise failure modes of vulnerable suppliers and thus create specific control plans to mitigate supply related failures. Using this approach, organisations can devise control plans to alleviate the supplier related risks during new product development. Although, the methodology is illustrated through an application in aircraft manufacturing, it can also be used in other discrete and process manufacturing industries.     

Optimal order quantity and product modularity for a two-echelon returnable supply chain

This study considers a supply chain consisting of a manufacturer, a retailer, customers and a returnable and modular product with uncertain demand, in which customers return the unsatisfactory products to the retailer, and the retailer returns the unsold products to the manufacturer. We investigate the effects of the manufacturer’s refund for the retailer’s unsold products and the product modularity under the decentralised and the centralised strategies. We confirm that the order quantity and customer’s return probability both affect the optimal modularity level of the product, and that the optimal modularity level is related to the refund policy. Also, a strategic alliance between the supply chain members is more advantageous to product innovation based on modularity for a returnable chain. Finally, managerial insights and remarks are offered.     

The implication of vendor inventory liability period in a decentralised assembly system

This paper investigates a decentralised assembly system that consists of one manufacturer and multiple suppliers who produce the complementary components. In a single selling season, the manufacturer initially sets a vendor inventory liability period (VILP) to control the suppliers’ delivery times, and the suppliers simultaneously determine when to deliver their components. Given the firms’ equilibrium strategies, we find that it is not wise for the manufacturer to set an overly long VILP, since having no inventory is not always beneficial to the manufacturer. A supplier may choose to postpone his delivery when the length of the VILP increases or the other suppliers’ deliveries are delayed, and either of these conditions is detrimental to the supplier’s profitability. We also examine the impact of VILP under different situations and find that having VILPs customised for different suppliers can reduce the manufacturer’s cost as well as improve the supply chain’s overall efficiency.     

A three-stage model for closed-loop supply chain configuration under uncertainty

In this paper, a general closed-loop supply chain (CLSC) network is configured which consists of multiple customers, parts, products, suppliers, remanufacturing subcontractors, and refurbishing sites. We propose a three-stage model including evaluation, network configuration, and selection and order allocation. In the first stage, suppliers, remanufacturing subcontractors, and refurbishing sites are evaluated based on a new quality function deployment (QFD) model. The proposed QFD model determines the relationship between customer requirements, part requirements, and process requirements. In addition, the fuzzy sets theory is utilised to overcome the uncertainty in the decision-making process. In the second stage, the closed-loop supply chain network is configured by a stochastic mixed-integer nonlinear programming model. It is supposed that demand is an uncertain parameter. Finally in the third stage, suppliers, remanufacturing subcontractors, and refurbishing sites are selected and order allocation is determined. To this end, a multi-objective mixed-integer linear programming model is presented. An illustrative example is conducted to show the process. The main novel innovation of the proposed model is to consider the CLSC network configuration and selection process simultaneously, under uncertain demand and in an uncertain decision-making environment.     

Incorporating risk aversion and fairness considerations into procurement and distribution decisions in a supply chain

This paper considers a three-tier supply chain in which a manufacturer uses raw materials sourced from multiple suppliers to produce an item and sells it through multiple distributors. We develop an integrated optimisation model to study supply chain procurement and distribution decisions incorporating the manufacturer’s aversion to risk and the distributors’ concern for fairness in a climate of uncertain supply and demand. Resilient strategies, such as alternative sourcing and transshipment, are also considered when optimising the supply chain cost and service level. To solve the problem, a Monte Carlo simulation-based multi-objective stochastic programming model is built. It uses the CVaR (Conditional Value-at-Risk) and unfairness aversion utility function to reflect the decision maker’s risk aversion and the customer’s concern for fairness, respectively. A Normalised Normal Constraint based algorithm is adopted to obtain the Pareto Frontier. In addition, the numerical analysis provides some valuable insights for supply chain managers.     

The role of spot market in a decentralised supply chain under random yield

We consider a decentralised supply chain with demand uncertainty, wherein a manufacturer sells a single product that consists of two components to the end consumer through an independent distributor. Assume that one component has a random yield, the manufacturer may rely on the spot market to replenish any shortage components after the random yield is realised. We identify the optimal product order, component production and replenishment decisions under two different situations. One is the traditional arrangement that the distributor decides the product procurement quantity and the manufacturer chooses the production quantity. The other is vendor-managed inventory (VMI) arrangement in which the manufacturer is responsible for both the order and the production decisions. The results show that the role of spot market can effectively offset the negative effects from production yield’s, market demand’s and component spot price’s variances. Consequently, the spot market leads to the cooperation between the manufacturer and the distributor, and improves the channel’s overall performance, in particular under the VMI arrangement when the wholesale price is sufficiently high.     

考虑销售努力和运输时间的农产品供应链弹性契约

目的 进一步实现农产品供应链数量弹性契约利润最大化。方法 在市场需求随机的条件下,考虑销售努力和运输时间为影响需求的关键变量,建立起由供应商和零售商组成的农产品供应链数量弹性契约模型。基于该模型引入奖励与惩罚策略,以实现农产品供应链弹性契约的一致性和有效性。结果 结合农产品特征,通过具体的模型优化方法和算例分析得出最优值以及各变量与最优销售努力水平、最优运输时间、最优订货量和整体农产品供应链利润之间的相关关系。结论 农产品供应链弹性契约能实现协调下的利润最大化,对农业经营主体企业开展农产品供应链弹性研究具有重要的理论和实践价值。     

Configuring a manufacturing firm's supply network with multiple suppliers

Consider a supply network consisting of a manufacturer and its suppliers. The manufacturer produces different types of products, using a common set of inputs (e.g., raw materials and/or component parts) from the suppliers: but, each product needs a different mix of these inputs. The manufacturer sells its finished products to the market at the end of the current decision horizon, facing an uncertain market demand. In situations where a manufacturer has outsourced its parts production to contract manufacturers, the contract manufacturer's capacity available for the given manufacturer in a particular time period may be limited by “capacity reservation” agreements made in advance. Thus, in making production mix decisions for the current planning horizon, the manufacturer has to take into account both its own and the component suppliers' capacity restrictions. We develop a mathematical model and an iterative algorithm that helps the manufacturer solve its supply configuration problem, that is, how much of each raw material and/or component part to order from which supplier, given capacity limits of suppliers as well as the manufacturer. The model takes into account such factors as market demand uncertainty, costs and product characteristics. We present an numerical example to illustrate the interacting effects among critical parameters in the model, and apply the model to a real-world case of a computer manufacturer.     

Improving the design phase through interorganisational product knowledge models

This paper focuses on the use of interorganisational knowledge models with the purpose of standardising engineer-to-order (ETO) products. Such product variant reductions can lead to decreased costs for both the ETO company and its suppliers without reducing sales. In spite of the attention that supply chain integration has received in the literature, supply chain integration with a focus on the integration of product knowledge in ETO companies and their suppliers has not received much attention. Thus, the purpose of this paper is to define this type of supply chain integration. The concept is investigated by a case study, which supports the claim that supply chain product knowledge integration is an approach for increasing the competitiveness of ETO companies and their suppliers. Given the gap in the literature, the paper may potentially open a new horizon for studying supply chain integration.     

基于讨价还价博弈的ATO供应链零部件生产及补货策略

通过建立ATO供应链中最终产品制造商与其两个供应商间的讨价还价合作模型,研究了ATO供应链的零部件生产补货策略和相应的利润分配策略,并探讨了供应链中各合作主体议价能力对最优解的影响。研究发现,ATO供应链应随着最终产品销售价格的提高而增加零部件产量,随最终产品组装成本或零部件生产成本的提高而减少零部件产量;随着最终产品制造商对其中一个供应商议价能力的增强,该供应商零部件的转移价格及其利润会降低,而另外一个供应商的零部件转移价格和利润会提高;若最终产品制造商比另外一个供应商的议价能力强,其期望利润会得到提高,反之,则会降低。     

Multiple decoupling point paradigms in a global supply chain syndrome: a relational analysis

A responsive and flexible supply chain in the global product value chain set-up links the manufacturer with various inter-company entities, such as suppliers, distributors, contract manufacturers and customers to deal with volatile demand. It is imperative and prudent to look at the overall product chain rather than focusing on any single supply chain entity. From a supply chain perspective, it is crucial that these individual entities are lean and agile (leagile) themselves, as well as the overall product value chain. As a result of the global nature of the product value chain, the concept of the decoupling point has undergone a paradigm shift. Through the literature review the authors establish three different types of decoupling point existing in product value chains, namely: (1) product structure decoupling point (PSDP), bill of materials decoupling; (2) supply structure decoupling point (SSDP), supply network decoupling; and (3) demand transfer decoupling point (DTDP), associated with information sharing. It is argued that such decoupling points are already an established and accepted phenomena, but have not been comprehensively discussed until now. It is proposed that, in the global supply chain, PSDP and SSDP are elemental decoupling points and DTDP is a logical decoupling, which is a function of PSDP and SSDP. It is proposed that DTDP swings between PSDP and SSDP and the swing direction is a critical piece of supply chain information that helps identify distortion. A multidimensional scaling (MDS) method is proposed to discover the relationship of DTDP with SSDP and PSDP using interpretation matrices and stress coefficients. Considering the supply chain as a fuzzy system, a combined effect of MDS over fuzzy applications has been used to determine the extent of swing of DTDP in the particular application of the supply chain.     

Developing a resilient supply chain through supplier flexibility and reliability assessment

In this study, we examine the optimal allocation of demand across a set of suppliers in a supply chain that is exposed to supply risk and environmental risk. A two-stage mixed-integer programming model is used to develop a flexible sourcing strategy under disruptions. Our model integrates supplier selection and demand allocation with transportation channel selection and provides contingency plans to mitigate the negative impacts of disruptions and minimise total network costs. Finally, a numerical example is presented to illustrate the model and provide insights. The findings suggest that developing contingency plans using flexibility in suppliers’ production capacity is an effective strategy for firms to mitigate the severity of disruptions. We also show that flexibility and reliability of the suppliers and regions play a significant role in determining contingency plans for during disruption. Findings generally show that highly flexible suppliers receive less allocation, and their flexible capacity is reserved for disruptions. For firms that do not incorporate risk management into supplier selection and allocation, the recommendation is to source from fewer, more reliable suppliers with less risk of disruption. Our findings also emphasise that the type of disruption has important implications for supplier selection and demand allocation. This study highlights the supply chain risk management strategy of regionalising as a means for minimising the impact of environmental disruptions.     

考虑互惠利他偏好和政府补贴的绿色供应链最优决策研究

为了研究政府补贴、绿色供应链制造商及零售商的互惠利他偏好对双方定价策略、利润、产品绿色度及绿色供应链整体利润的影响,运用博弈理论结合数值仿真方法对4种决策情形下的绿色供应链成员最优策略进行了研究。结果表明,制造商或零售商单方面的互惠利他偏好均会降低自身利润,提高产品绿色度、对方利润及供应链整体利润,且当双方互惠利他程度相同时,零售商的互惠利他偏好更能有效提高产品绿色度;无论是制造商或零售商具有互惠利他偏好,政府增加补贴均会在一定程度上增强其互惠利他偏好对产品绿色度、对方利润及供应链整体利润的提升作用,但不同的是,当制造商具有互惠利他偏好时,政府增加补贴会在一定程度上加重其互惠利他偏好对其自身利润的损害作用,当零售商互惠利他时则不会出现这种情况。