Dynamic mutual adjustment search for supply chain operations planning co-ordination

Operational planning is an activity carried out by all manufacturing and logistical companies. Its co-ordination with supply chain partners aims at synchronising resources utilisation in order to minimise inefficiencies, such as unnecessary inventory holding, or in order to improve revenue through better resource utilisation. It is a rather complex process as partners have different objectives and information asymmetry is part of any effort to find good co-ordination solutions. Furthermore, because supply chains evolve in a dynamic and uncertain environment, once a co-ordination of operations plans is achieved, input data, such as forecasts or resources’ status, can change and affect on hand plans. These dynamic changes not only require updating the plan that is directly affected by the changes, but it also requires the adjustment of all plans that are part of the same co-ordination solution (Stadtler, H. 2009. A framework for collaborative planning and state-of-the-art. OR Spectrum, 31 (1), 5–30). Therefore, the development of a practical co-ordination approach should be capable of dealing with these dynamic changes. This paper proposes a dynamic mutual adjustment search heuristic, which can be used to co-ordinate the operations plans of two independent supply chain partners, linked by material and non-strategic information flows. Computational analysis shows that the proposed approach produces a win-win strategy in the context of two supply chain partners, and improves the results of upstream planning in each planning cycle, and also improves the fairness of revenue sharing when compared to optimal centralised planning.