Coordination of a single-supplier multi-retailer supply chain via joint ordering policy considering incentives for retailers and utilizing economies of scale

Document Type : Article

Authors

1 Department of Industrial Engineering, Faculty of Engineering, Alzahra University, Tehran, Iran

2 Faculty of Asia Pacific Studies, Ritsumeikan Asia Pacific University, Beppu, Japan

Abstract

Lead time fluctuations cause a low supply chain service level through increasing stock-outs. Lack of the supplier’s awareness of the retailers’ ordering policy is one of the main reasons for the lead time fluctuations. In this paper, a two-echelon supply chain including single supplier, multiple retailers is studied under two scenarios of decentralized and centralized decision-making. In the first scenario, each retailer independently uses a continuous review inventory policy and the supplier does not know when each retailer will order. This policy prolongs order fulfillment by the supplier and increases order-processing costs. In the second scenario, retailers are encouraged to enter into a joint cooperation plan and change their ordering policy from independent continuous review policies to a joint periodic review policy. In this case, the supply chain can utilize the benefits of economies of scale via integrating and shipping several retailers’ orders. The study also determines range of the acceptable lead time reduction by supplier and retailers for participating in the joint cooperation plan. The results show that joint cooperation plan creates more benefits for the supply chain in terms of cost and service level.

Keywords

References

  • References

    • Jamshidi, R., Fatemi Ghomi, S. M. T., & Karimi, B. “Flexible supply chain optimization with controllable lead time and shipping option”, Applied Soft Computing Journal, 30, pp. 26–35 (2015).
    • Ouyangt, L.-Y., & Wu, K.-S. “Mixture inventory model involving variable lead time with a service level constraint”, Computers & Operations Research, 24(9), 875–882 (1997).
    • Chaharsooghi, S. K., & Heydari, J. “LT variance or LT mean reduction in supply chain management: Which one has a higher impact on SC performance?”, International Journal of Production Economics, 124(2), 475–481 (2010).
    • Shankar, B. L., Basavarajappa, S., Kadadevaramath, R. S., et al., “A bi-objective optimization of supply chain design and distribution operations using non-dominated sorting algorithm: A case study”, Expert Systems With Applications, 40(14), 5730–5739 (2013).
    • Heydari, J. “Lead time variation control using reliable equipment : An incentive scheme for supply chain coordination”, Transportation Research Part E, 63, pp. 44–58 (2014).
    • Liao, C. J., & Shyu, C. H. “An analytical determination of lead time with normal demand”, International Journal of Operations & Production Management, 11(9), 72–78 (1991).
    • Pan, J. C. H., & Yang, J. S. “A study of an integrated inventory with controllable lead time”, International Journal of Production Research, 40(5), 1263–1273 (2002).
    • Ryu, S. W., & Lee, K. K. “A stochastic inventory model of dual sourced supply chain with lead-time reduction”, International Journal of Production Economics, 81, pp. 513–524 (2003).
    • Yang, J. S., & Pan, J. C. H. “Just-in-time purchasing: an integrated inventory model involving deterministic variable lead time and quality improvement investment”, International Journal of Production Research, 42(5), 853–863 (2004).
    • Chang, H. C., Ouyang, L. Y., Wu, K.-S., et al., “Integrated vendor – buyer cooperative inventory models with controllable lead time and ordering cost reduction”, European Journal of Operational Research, 170(2), 481–495 (2006).
    • Ouyang, L. Y, Wu, K. S., & Ho, C. “An integrated vendor – buyer inventory model with quality improvement and lead time reduction”, International Journal of Production Economics, 108(1–2), 349–358 (2007).
    • Heydari, J., Baradaran Kazemzadeh, R., & Chaharsooghi, K. “A study of lead time variation impact on supply chain performance”, The International Journal of Advanced Manufacturing Technology, 40(11–12), 1206–1215 (2009).
    • Hsu, S. L., & Lee, C. C. “Replenishment and lead time decisions in manufacturer – retailer chains”, Transportation Research Part E: Logistics and Transportation Review, 45(3), 398–408 (2009).
    • Jha, J. K., & Shanker, K. “Two-echelon supply chain inventory model with controllable lead time and service level constraint”, Computers & Industrial Engineering, 57(3), 1096–1104 (2009).
    • Li, Y., Xu, X., & Ye, F. “Supply chain coordination model with controllable lead time and service level constraint”, Computers & Industrial Engineering, 61(3), 858–864 (2011).
    • Huang, Y. S., Su, W. J., & Lin, Z. L. “A study on lead-time discount coordination for deteriorating products”, European Journal of Operational Research, 215(2), 358–366 (2011).
    • Glock, C. H. “Lead time reduction strategies in a single-vendor–single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand”, International Journal of Production Economics, 136(1), 37–44 (2012).
    • Li, Y., Xu, X., Zhao, X., et al., “Supply chain coordination with controllable lead time and asymmetric information”, European Journal of Operational Research, 217(1), 108–119 (2012).
    • Arkan, A., & Hejazi, S. R. “Coordinating orders in a two echelon supply chain with controllable lead time and ordering cost using the credit period”, Computers & Industrial Engineering, 62(1), 56–69 (2012).
    • Dey, O., & Chakraborty, D. “A fuzzy random periodic review system with variable lead-time and negative exponential crashing cost”, Applied Mathematical Modelling, 36(12), 6312–6322, (2012).
    • Moon, I., Shin, E., & Sarkar, B. “Min – max distribution free continuous-review model with a service level constraint and variable lead time”, Applied Mathematics and Computation, 229, pp. 310–315 (2014).
    • Heydari, J., Zaabi-ahmadi, P., & Choi, T. “Coordinating supply chains with stochastic demand by crashing lead times”, Computers & Operation Research, 100, pp. 394–403 (2016).
    • Lin, H. “Investing in lead-time variability reduction in a collaborative vendor-buyer supply chain model with stochastic lead time”, Computers and Operation Research, 72, pp. 43–49 (2016).
    • Mou, Q., Cheng, Y., & Liao, H. “A note on: lead time reduction strategies in a single-vendor-single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand”, International Journal of Production Economics, 193, pp. 827–831 (2017).
    • Yılmaz, Ö. F., & Pardalos, P. M. “Minimizing average lead time for the coordinated scheduling problem in a two-stage supply chain with multiple customers and multiple manufacturers”, Computers & Industrial Engineering, 114, pp. 244–257 (2017).
    • Sarkar, B., & Mahapatra, A. S. “Periodic review fuzzy inventory model with variable lead time and fuzzy demand”, International Transactions in Operational Research, 24(5), 1197–1227 (2017).
    • Hossain, M.D.S.J., Ohaiba, M.M., & Sarker, B.R. “An optimal vendor-buyer cooperative policy under generalized lead-time distribution with penalty cost for delivery lateness”, International Journal of Production Economics, 188, 50–62. (2017).
    • Yang, J.Q., Zhang, X.M., Fu, H.Y., et al., “Inventory competition in a dual-channel supply chain with delivery lead time consideration”, Applied Mathematical Modelling, 42, 675-692 (2017).
    • Sarkar, B., Guchhait, R., Sarkar, M., et al., “Impact of safety factors and setup time reduction in a two-echelon supply chain management”, Robotics and Computer Integrated Manufacturing, 55, pp. 250–258 (2018).
    • Udayakumar, R., & Geetha, K. V. “Supply chain coordination with controllable lead time under imperfect production process”, Journal of Intelligent & Fuzzy Systems, 34(3), 2003–2019 (2018).
    • Dominguez, R., Cannella, S., Ponte, B., et al., “On the dynamics of closed-loop supply chains under remanufacturing lead time variability”, Omega, pp. 102-106 (2019).
    • Malik, A. I., & Sarkar, B. “Coordinating Supply-Chain Management under Stochastic Fuzzy Environment and Lead-Time Reduction”, Mathematics, 7(5), pp. 1-28 (2019).
    • Hellemans, T., Boute, R.N., & Houdt, B.V. “Analysis of lead time correlation under a base-stock policy”, European Journal of Operational Research, 276, 519-535 (2019).
    • Slama, I., Ben-Ammar, O., Masmoudi, F., et al., “Scenario-based stochastic linear programming model for multi-period disassembly lot-sizing problems under random lead time”, IFAC-PapersOnLine, 52(13),  595-600 (2019).
    • Dziri,, Hammami, R., & Jemai, Z. “Dynamic inventory optimization for a serial supply chain with stochastic and lead-time sensitive demand”, IFAC-PapersOnLine, 52(13), pp. 1034-1039 (2019).
    • Transchel, S., & Hansen, O. “Supply planning and inventory control of perishable products under leadtime uncertainty and service level constraints”, Procedia Manufacturing: 25th International Conference on Production Research Manufacturing Innovation: Cyber Physical Manufacturing, 39, 1666–1672 (2019).
    • Sun, X., & Zhang, R. “The single-manufacturer single-retailer integrated production-delivery lot sizing model with production capacity under stochastic lead time demand”, Procedia CIRP, 83, 528-533 (2019).
    • Tang, L.N., Ma, Y.Z., Wang, J.J., et al., “Robust parameter design of supply chain inventory policy considering the uncertainty of demand and lead time”, Scientia Iranica E, 26(5), 2971-2987 (2019).
    • Li, X. “Valuing lead-time and its variance in batch-ordering inventory policies”, International Journal of Production Economics, 228, 1-7 (2020).
    • Cui, L., Deng, J., Liu, R., et al., “A stochastic multi-item replenishment and delivery problem with lead-time reduction initiatives and the solving methodologies”, Applied mathematics and computation, 374, In Press, https://doi.org/10.1016/j.amc.2020.125055 (2020).
    • Dey, B. K., Bhuniya, S., & Sarkar, B. “Involvement of controllable lead time and variable demand for a smart manufacturing system under a supply chain management”, Expert Systems with Applications, 184, 115464 (2021).
    • Karthick, B., & Uthayakumar, R. “Optimizing an imperfect production model with varying setup cost, price discount, and lead time under fuzzy demand”, Process Integration and Optimization for Sustainability, 5(1), 13-29 (2021).
    • Tersinet, R. J. (1982), Principles of inventory and materials management, New York: North Holland.
    • Silver, E.A., Pyke, D.F., Peterson, R. “Inventory Management and Production Planning and Scheduling, third ed”, John Wiley & Sons, New York (Chapter 7) (1998).
    • Özkaya, E., Keskinocak, P., Joseph, V. R., et al., “Estimating and benchmarking Less-than-Truckload market rates”, Transportation Research Part E: Logistics and Transportation Review, 46(5), 667–682 (2010).
Scientia Iranica

Articles in Press, Accepted Manuscript
Available Online from 03 February 2022

Files

Share

How to cite

Statistics