A control system for coordinated inventory replenishment*

There are frequent occasions where the coordination of replenishment orders for selected groups of items can lead to significant savings in the costs of replenishment. This paper is concerned with a practical procedure for selecting the order-up-to-levels, can-order points and must-order points of a particular coordinated control system. Demand is Foisson and a fixed non-zero replenishment lead time is assumed. Cost comparisons with the best independent control strategy indicate that substantial savings (averaging 18-8% over some 104 examples) are possible through coordination.     

A coordinated inventory control system for compound Poisson demand and zero lead time†

Often coordination of items for replenishment purposes can lead to significant savings in the costs of replenishment. This article presents a reasonable procedure for determining the values of the various control variables of an (S, c, e) control system, namely the Order-up-to-levels, the can-order points and the must-order points. It is assumed that demand is compound Poisson and the replenishment lead time is of negligible duration. Comparison with the best independent control strategy indicates that substantial savings (averaging 15-9% over some 64 examples) are possible through coordination of replenishments.     

A note on the can-order policy for the two-item stochastic joint-replenishment problem

In this paper, a two-item continuous-review inventory system is studied. Demands for item 1 and item 2 occur at epochs generated by independent Poisson processes. In addition to the standard cost structure, there is economy of scale in joint replenishment. For the continuous joint replenishment problem, the literature proposes the can-order policy. Under this policy, an order is triggered by item 1 at its demand epoch, when its inventory position falls to its reorder level. In this situation, if the inventory position of item 2 is at or below its “can-order” level, item 2 is also included in this order and a discounted fixed ordering cost is charged for it. As a result, the inventory positions of both items are raised to their respective order-up-to levels. Reciprocally, the same procedure is valid at the demand epoch of item 2. In this study, this two-item inventory system is modeled as a semi-Markov decision process and a simple enumeration algorithm is proposed for its solution. We show that previous formulations of the problem do not necessarily converge to the best can-order policy by providing numerical examples.     

Economic production quantity (EPQ) model with partial backordering and a discount for imperfect quality batches

Economic production quantity (EPQ) models are traditionally used in operations management. Despite the large number of papers that describe the models, the classic EPQ model does not consider either imperfect quality batches or shortages. However, some industries may be able to sell imperfect items for a lower price, reducing the total production cost. This paper proposes an EPQ model with partial backordering and discount for imperfect quality batches and an algorithm that returns optimal values for the problem. From a numerical example, it is possible to analyse how the changes in the variables affect each part of the total cost function, which provides a useful tool for strategic decision-making. We conclude that it is better to sell imperfect items as soon as possible because the savings in holding costs results in a total cost reduction. It is more profitable for the producer to have planned shortages considering that some costumers are willing to wait. Furthermore, the reduction of the goodwill cost does not necessarily reduce the total cost.     

A comprehensive end-of-life strategy decision making approach to handle uncertainty in the product design stage

This study employs fuzzy logic to evaluate uncertain component end-of-life (EOL) options in the design stage. Determining EOL strategies during the product design stage can be complex. For example, EOL strategies for retired bicycle components are various and may change with geographic location. Thus, adopting fixed EOL strategies in the product design stage may not always be appropriate; the element of uncertainty should be considered. Limited research has examined uncertainty of EOL strategies during the design stage. Moreover, the evaluation of EOL strategies in a comprehensive manner has not been shown in a realistic case study. These facts motivate this investigation. Fourteen evaluation criteria are used to generate a comprehensive framework for assessing seven EOL strategies. The evaluation process generates the likelihood for each of these strategies by aggregating fuzzy set operations and a left–right fuzzy ranking method. Using SUMPRODUCT calculation for these weights/probabilities and input sustainability value (i.e., cost, environmental impact and labor time), expected values are derived to represent the sustainability values for each EOL strategy. A Technique-for-Order-of-Preference-by-Similarity-to-Ideal-Solution (TOPSIS) based method is employed to identify the appropriate EOL strategy for each component/product. A refrigerator is used as a case study to illustrate the methodology. This study addresses the uncertainty involved in identifying an EOL strategy for a specific product component during the design stage through the use of fuzzy logic. The method closes a gap in the current EOL strategy assessment criteria and introduces a comprehensive evaluation framework to capture multiple strategic perspectives by incorporating 14 key evaluation criteria.     

Outsourcing in non-developed supplier markets: a lean thinking approach

The benefits organisations can gain from outsourcing include cost savings and higher levels of innovation. On the other hand, outsourcing drawbacks include potential operations and performance issues such as capability and capacity problems. Some large organisations are pursuing the practice of outsourcing, more specifically, targeting global outsourcing from developing and low-wage countries. However, the perception of expected cost saving benefits when outsourcing to low-wage countries does not always reflect reality. A number of companies have failed to achieve the expected cost savings in sourcing from low-wage countries due to operational-level capability. The objective of this study is to develop an extended evaluation method that takes into account operational-level influence factors, in addition to the procurement factors, in the context of non-developed supplier markets. Our extended evaluation method of potential suppliers addressed the paradigm of ‘standard industry recipes’, by encompassing operational-level influence factors and integrating supplier value stream analysis into the evaluation and selection process of outsourcing. A survey was distributed to 369 international manufacturers. Operational levels were categorised into seven latent constructs: Customer Service/Sales, Purchasing, Production Planning and Control, Manufacturing Engineering, Shop Floor and Quality Control, Receiving and Shipping. Structural Equation Modelling (SEM) confirmed the seven constructs, but measuring items were reduced from 39 to 23 significant observed measuring items, compromising the supplier selection framework. Our proposed framework will help practitioners make better informed decisions in outsourcing from non-developed supplier markets.     

Spare parts failure prediction of an automobile under criticality condition

Many studies on spare parts planning classified items based on the levels of importance using conventional approaches. Classification of spare parts based on the stated approach without considering failure value and/or its consequence may not withstand the test of time due to continuing technological advancement or environmental degradation. This study solved the stated problem by developing a system that is capable of dynamically determining critical equipment/spare parts based on failure rates using ABC analysis. In this analysis, all operable items were considered to be non-critical and they became critical when they approached failure time. These transitions were prompted by items’ failure conditional probability within the limits of 1, 2/3, 1/3 for highly critical, critical and less critical items, respectively. The most critical item(s) (A class) with highest failure value/consequence were sorted out based on specificity (one manufacturer’s item) and generality (many manufacturers’ item). Failure remedy was achieved by applying modified classical inventory model which considered heterogeneity in item failure. The stated conditions were integrated into a time series, linear regression model. The performance evaluation results showed that the new scheme was efficient in spare part failure criticality classification, consequence analysis and remedy. The practical implication of the findings indicated that the developed system could serve as a suitable alternative to the static classification style of the conventional approach in term of cost savings.     

Performance of a Manufacturing Cell with Increased Product Mix

We investigate the impact of increasing the number of items made in a cell on its performance. The optimal lotsizes of production and queuing delays are both shown to increase with increased product mix. However, these adverse effects diminish as more items are assigned to the cell. We also examine a strategy of sequencing which attempts to minimize the number of setups by looking ahead in the queue and processing all items for which the machine is already setup. In the case of similar items, it is found that this sequencing policy results in little savings in setup time.     

Relaxed asynchronous flow-control algorithms for multiclass service networks

This paper addresses resource sharing in a multiclass service center. The flow of service requests from each class of customers are regulated by a class manager who attempts to maximize the class net benefit (throughput reward less delay cost). Relaxed asynchronous algorithms are proposed for obtaining a Nash equilibrium among these competing classes in which each manager iteratively updates his throughput strategy in response to local (and possibly delayed) information on the strategies of the others. The novelty of these flow-control algorithms are in the relaxation, whereby each manager employs a strategy update that is a convex combination of his previous strategy and his best-reply strategy to current information. Alternatively, this relaxation can be viewed as an exponential smoothing of all previous best-reply strategies. For a particular number of classes with specified cost/ reward parameters, relaxation conditions for asymptotic convergence to the unique interior Nash equilibrium are presented. For more than two classes, it is shown that relaxation not only accelerates convergence (at least in a special case), but also is a necessary condition for convergence. Due to an equivalent functional form, these results can be directly translated to a network of users employing a power criterion, a common objective in the communications literature.     

A maintenance strategy for two-dimensional extended warranty based on dynamic usage rate

Maintenance strategies are commonly used for repairable products or items to reduce the warranty cost in the warranty coverage. This study proposes a new warranty maintenance strategy for two-dimensional extended warranty (EW) based on dynamic usage rate. Unlike previous studies that assumed a constant usage rate, the present study regards the consumer usage rate as dynamic in the two-dimensional EW coverage. A maintenance model is constructed to determine the optimal maintenance degree of warranty claim points and help service providers accurately estimate and reduce warranty cost. A numerical example of an automobile made in China is discussed to demonstrate the effectiveness of the proposed model. The formulated model can effectively reflect the changes in the consumer usage rate and thus helps service providers develop an accurate maintenance strategy. Meanwhile, the developed model can better reduce warranty cost compared with maintenance strategies with minimal repair.     

航运公司合作下的海运空箱调运模糊优化模型

目的对单独调箱与合作调箱策略进行对比分析,以期为航运公司选择最佳调箱策略提供参考。方法考虑港口空箱供需差和运力约束的模糊性,以空箱调运总成本最小为目标,建立基于航运公司合作的海运空箱调运模糊优化模型,并通过LINGO建模求解具体算例。结果与单独调箱策略相比,采用合作调运策略能够有效降低航运公司的物流总成本。其中0.32%来自存储成本的节约,54.05%来自租箱成本的节约,45.63%来自运输成本的节约。结论采用合作调箱策略,能够降低航运公司空箱调运的总成本,能够弱化单位空箱存储成本和租赁成本的增加对空箱调运总成本的影响,但单位运输成本和运费加成因子的增加会降低合作调运空箱策略的优势。     

Economic evaluation of disassembly processes in remanufacturing systems

A model to deal with the disassembly processes in remanufacturing systems is presented with focus being on evaluating their economic consequences. More specifically, the model assists decisions such as to which degree and for the sake of which components should the returned items be disassembled. Consequently, using the economic values of recoverable items, the inventory holding costs of these items are obtained. This information is further used to determine the inventory control policy. To access such economic values, the above average cost approach is compared with the net present value method. The latter is often considered a more?‘correct’?way in remanufacturing systems from the viewpoint of inventory control. The results from the economic evaluation model are intended to aid companies in systematically evaluating current as well as projected remanufacturing systems.     

A two-dimensional preventive maintenance strategy for items sold with warranty

Conventional preventive maintenance (PM) strategies under two-dimensional (2D) warranties are usually age-based or usage-based, which means that the implementation of PM activities is based solely on item age or usage. In this paper, a new PM strategy, called 2D PM strategy, is proposed for items sold with a 2D warranty. Under this strategy, the item is preventively maintained every K units of age or L units of usage, whichever occurs first. The marginal approach is used to describe the effect of age and usage on item reliability by treating usage as a random function of age. Besides, the effect of PM is characterised by the reduction of virtual age. The objective of this study is to identify the optimal 2D PM strategy under fixed warranty terms so as to minimise the total expected warranty servicing cost from the manufacturer’s perspective. A numerical example is provided to demonstrate the effectiveness of the proposed PM strategy. It is shown that the 2D PM strategy contains the age-based and usage-based strategies as special cases, and outperforms them in terms of warranty servicing cost. Finally, how to implement the proposed PM strategy in practice is discussed with an illustrative case.     

短生命周期产品的延期交货和价格折扣模型

用斜坡型函数来描述短生命周期产品需求变化特征,用持有成本不断增加表示短生命周期产品无形变质所带来的损失,研究在允许缺货情况下,如何设置合理价格折扣来控制订单的流失,确定各周期的最佳延迟供货量、最优价格折扣、最优订货时间和订货量,从而实现企业总成本的最优。给出了一种迭代逼近的方法来寻求在有限时域内的最优订购策略,通过数值分析验证了该模型的有效性和可操作性,对相应的参数做出了灵敏度分析。该模型能够确定出企业最佳的价格折扣以挽留住更多的顾客,使其总利润达到最优。     

An integrated model for optimisation of production and quality costs

Whether an industrial organisation is involved with production of new goods or engaged in reverse logistics to recycle used products, the items produced that do not meet specifications can cost the organisation in many different ways. The administrative expenses of handling returned items and the cost of reworking the items that have failed in plant quality control or returned by customers can be of concern to the manufacturers. While these are measurable costs, there are other costs such as loss of customers’ good will which are hard, if not impossible, to estimate. The model presented in this paper is aimed at optimising the measurable cost of reworking/scrapping the off-specification items as well as the cost of adjusting manufacturing processes with the aim of reducing or eliminating rejected pieces. The adjustment of process specification in relation to customer specification is a strategy that can affect production and quality cost. Consideration for optimal production specification is one of the elements of the model presented in this paper. In the proposed model, the direct cost of poor quality has been represented by a symmetrical truncated loss function. We have considered investment to adjust the mean and variance of the process. A numerical example is presented to demonstrate how the model can work in a real-world setting.     

新鲜度差异下两种可替代生鲜品的多阶段定价策略研究

研究单个零售商销售2种可替代生鲜产品时的价格决策,建立3种定价策略下的决策模型,得到2种产品的最优固定价格、最优折扣价格和最优捆绑价格售价;通过数值仿真分析影响零售商价格决策的因素及其影响大小。研究结果表明,3种策略下产品价格都与产品新鲜度临界值同方向变化;最优固定价格随销售期临近度的增大而变高;对比3种策略下零售商的利润发现,有时捆绑价格是占优策略,有时折扣价格是占优策略,参数的大小是关键因素。     

Establishing reorder points in the (S,c,s) coordinated control system under compound Poisson demand

This paper is concerned with the coordinated control of a group of inventoried items in order to reduce the costs of replenishments. The specific control system considered is what is denoted as an (S,c,s) system. The very general case of compound Poisson demand is considered. In earlier work a procedure was developed for finding the order-up-to levels (i.e. the Ss) and the can-order points (i.e. the cs) for the case of a negligible lead time. Taking these quantities as input an algorithm is developed for finding the must-order points (i.e the.s values) so as to satisfy one of two types of service constraints specified item by item. The results of two numerical illustrations are also shown.     

Quality control of an unreliable random FMS: with Bernoulli and CSP sampling

It is widely recognized that disassembly-based product End-of-Life strategies, such as component reuse or simple fraction material recycling, are environmentally beneficial. However, current disassembly costs hinder a widespread application of these strategies. This paper quantifies the disassembly time reductions required to achieve economic feasibility of systematic product disassembly. A modelling framework, based on linear programming, is used to investigate the effect of reducing the expected disassembly time and cost on the selection of the optimal End-of-Life strategy. The problem is optimized from an End-of-Life treatment facility point of view. All findings are based on the Belgian cost and price information captured in spring 2004. The linear programming model shows that for small products from the Waste of Electric and Electrical Equipment (WEEE) category disassembly-based End-of-Life strategies will hardly become optimal, while for medium- and large-sized products, this scenario can be made optimal if a substantial disassembly time reduction is achieved. Possible strategies to realize such reduction are briefly sketched.     

Development of a production inventory model with uncertainty and reliability considerations

This paper addresses a problem of an imperfect production system under fuzzy demand and inventory holding cost. Production process reliability is considered because of the imperfect production process. In this problem, reliability of the system in regards to producing defective and non-defective items is considered as a decision variable. The objective is to maximize the graded mean integration value (GMIV) of the expected average profit while considering revenues as well as any other relevant costs. The developed model belongs to the class of a geometric programming. We have developed a simple mathematical methodology to solve the model. Genetic algorithm and simulated annealing algorithms are also applied to solve and validate the results. A numerical example has been presented to interpret the solutions.     

Log classification in the hardwood timber industry: method and value analysis

Natural resources industries, such as the forest product industry, must deal with variable input material, which affects their efficiency and their ability to accurately predict output yields. In order to address this, the industry can use technologies that adapt to variable input, or plan its operations taking variability into account. In the Canadian softwood lumber industry, the first approach is used with the adoption of advanced technologies that adapt sawing patterns to logs’ and work-in-process characteristic using scanners technology. Another approach to deal with material variability is input material classification. Specific characteristics can be measured to classify input material and reduce variability within each class. However, whether the process involves logs, mining ores or recycled papers, material classification has both a value and a cost. This paper first proposes a method based on classification tree analysis to classify hardwood logs. Next, using agent-based simulation, it analyses the value of different classification strategies, from detailed, to no classification at all. Results show in the context of the Québec hardwood lumber industry that the benefit of detailed classification is offset by its cost, while a relatively simple classification strategy dramatically improves output yield at relatively low cost.