Operations research models and methods for safety stock determination: A review

In supply chain inventory management it is generally accepted that safety stocks are a suitable strategy to deal with demand and supply uncertainty aiming to prevent inventory stock-outs. Safety stocks have been the subject of intensive research, typically covering the problems of dimensioning, positioning, managing and placement. Here, we narrow the scope of the discussion to the safety stock dimensioning problem, consisting in determining the proper safety stock level for each product. This paper reports the results of a recent in-depth systematic literature review (SLR) of operations research (OR) models and methods for dimensioning safety stocks. To the best of our knowledge, this is the first systematic review of the application of OR-based approaches to investigate this problem. A set of 95 papers published from 1977 to 2019 has been reviewed to identify the type of model being employed, as well as the modeling techniques and main performance criteria used. At the end, we highlight current literature gaps and discuss potential research directions and trends that may help to guide researchers and practitioners interested in the development of new OR-based approaches for safety stock determination.This work has been supported by FCT – Fundação para a Ciência e Tecnologia within the R&D Units Project Scope: UIDB/00319/2020, and by the European Structural and Investment Funds in the FEDER component, through the Operational Competitiveness and Internationalization Program (COMPETE 2020) [Project no. 39479, Funding reference: POCI-01-0247-FEDER-39479]

A hybrid bi-objective optimization approach for joint determination of safety stock and safety time buffers in multi-item single-stage industrial supply chains

In material requirements planning (MRP) systems, safety stock and safety time are two well-known inventory buffering strategies to protect against supply and demand uncertainties. While the role of safety stocks in coping with uncertainty is well studied, safety time has received only scarce attention in the supply chain management literature. Particularly, most previous operations research models have typically considered the use of such inventory buffers in a separate fashion, but not together. Here, we propose a decision support system (DSS) to address the problem of integrating optimal safety stock and safety time decisions at the component level, in multi-supplier multi-item single-stage industrial supply chains under dynamic demands and stochastic lead times. The DSS is based on a hybrid bi-objective optimization approach that simultaneously optimizes upstream inventory holding costs and β-service levels, suggesting multiple non-dominated Pareto-optimal solutions to decision-makers. We further explore a weighted closed-form analytical expression to select a single Pareto-optimal point from a set of non-dominated solutions, thereby enhancing the practical application of the proposed DSS. We describe the implementation of our approach in a major automotive electronics company operating under a myriad of components with dynamic demand, uncertain supply and requirements plans with different degrees of sparsity. We show the potential of our approach to improve β-service levels while minimizing inventory-related costs. The results suggest that, in certain cases, it appears to be more cost-effective to combine safety stock with safety time compared to considering each inventory buffer independently.This work has been supported by the European Structural and Investment Funds in the FEDER component, through the Operational Competitiveness and Internationalization Pro-gram (COMPETE 2020) [Project No. 39479, Funding reference: POCI-01–0247-FEDER-39479]

K-means clustering combined with principal component analysis for material profiling in automotive supply chains

At a time where available data is rapidly increasing in both volume and variety, descrip- tive Data Mining (DM) can be an important tool to support meaningful decision-making processes in dynamic Supply Chain (SC) contexts. Up until now, however, scarce attention has been given to the application of DM techniques in the field of inventory management. Here, we take advantage of descriptive DM to detect and grasp important patterns among several features that coexist in a real-world automotive electronics SC. Concretely, Principal Component Analysis (PCA) is employed to analyze and understand the interrelations between ten quantitative and dependent variables in a multi-item/multi-supplier environment. Afterwards, the principal component scores are character- ized via a K-means clustering, allowing us to classify the samples into four clusters and to derive di↵erent profiles for the multiple inventory items. This work provides evidence that descriptive DM contributes to find interesting feature-patterns, resulting in the identification of important risk profiles that may e↵ectively leverage inventory management for superior performance.This work has been supported by FCT - Fundacao para a Ciencia e Tecnologia within the R&D Units Project Scope: UIDB/00319/2020. The authors want to extend grateful thanks to the editors and reviewers, whose comments have greatly improved the quality of the paper

A structured method for the optimization of the existing last mile logistic flows

Dissertation presented as the partial requirement for obtaining a Master's degree in Information Management, specialization in Knowledge Management and Business IntelligenceIn a fast-moving world some business exists due to the interconnectivity between countries. This happens because transports are able to reach the other side of the globe within few days and without being too expensive compensating the lower costs of production and competitive advantages. This is true for well-organized and big supply chains but even them can benefit from integration with disconnected and more complex supply chain as it is the case of e-commerce chains. The transaction of small packages from online shopping required in a totally distinct country of the place of production have very specific characteristics as they are spot flows, hard to predict and to combine with other goods owing to the fact that the destination of flows are different every time and it is not always worth it to dedicate a transport for such a small goods value and in addition most times, logistics have to answer to some challenging marketing requirements meaning they have time windows to fulfil. Last mile is a big part of logistics transports and is one important part of it that can really help companies having better prices and revenues for their transports. Last mile solutions need to be easy to implement and really have to translate in quick gains to logistic companies that are largely reducing their margins to increase competitiveness. In this context, the study aims to investigate and define a method following design Research Methodology hopping to draw some innovative solutions for the problem of last mile. In this respect, the work developed intends to study the solutions already implemented and extract insights on how distribution is made and how to maximize last mile profit through the mature of an algorithm able to reduce inefficiencies in a simple way without having to wiggle too much the structure of businesses as resources of last mile service providers are understood to be scarce as many last mile companies are small sized and running under big logistic players. The solution aims to attain the different marketing requirements exactly as it was defined without having to compromise anything but still being able to make good profit margins and perhaps make room for new opportunities to arise that previously were not profitable

Selection of Food Items for Diet Problem Using a Multi-objective Approach under Uncertainty

It is a problem that concerns us all: what should we eat on a day-to-day basis to meet our health goals? Scientists have been utilizing mathematical programming to answer this question. Through the use of operations research techniques, it is possible to find a list of foods that, in a certain quantity, can provide all nutrient recommendations in a day. In this research, a multi-objective programming model is provided to determine the selected food items for a diet problem. Two solution approaches are developed to solve this problem including weighted-sums and ε-constraint methods. Two sources of uncertainty have been considered in the model. To handle these sources, a scenario-based approach is utilized. The application of this model is shown using a case study in Canada. Using the proposed model and the solution approaches, the best food items can be selected and purchased to minimize the total cost and maximize health

Green port development in Hong Kong - reduction of marine and port-related emissions

The Conference proceedings' website is located at http://www.hsmc.edu.hk/images/scm_CallForPaper/Conference%20Proceedings.pdfThe impact of air pollutant emissions from shipping and port operations towards environment and health is a pressing global concern. The marine and port sectors have contributed significantly to the growth of the supply chain industry and the economic development, while, at the same time, the pollutant emissions rising from ships and port-related operations have inflicted adverse public health concerns. Leading ports and terminals continuously impose measures to reduce the greenhouse gas emitted during vessel berthing. Hong Kong, being the third largest container port in the world and having the second cruise terminal running into operation, urgently requires comprehensive green port operations and practices. This paper evaluates and benchmarks the latest measures conducted by the leading ports over the world in reducing the greenhouse gas emissions from ship and port operations. International regulations, onshore power supply, vessel speed reduction, and fuel switching are analyzed. Recommendations on the future green port development in Hong Kong are proposed.postprin

The effect of supply chain noise on the financial performance of Kanban and Drum-Buffer-Rope: An agent-based perspective

Managing efficiently the flow of products throughout the supply chain is essential for succeeding in today's marketplace. We consider the Kanban (from Lean Management) and Drum-Buffer-Rope (DBR, from the Theory of Constraints) scheduling mechanisms and evaluate their performance in a four-echelon supply chain operating within a large noise scenario. Through an agent-based system, which is presented as a powerful model-driven decision support system for managers, we show the less sensitivity against variability and the higher financial performance of the DBR mechanism, which occurs as this mechanism improves the supply chain robustness due to its bottleneck orientation. Nonetheless, we prove the existence of regions in the decision space where Kanban offers similar performance. This is especially relevant taking into account that Kanban can be implemented at a lower cost, as TOC requires a higher degree of information transparency and a solid contract between partners to align incentives. In this sense, we offer decision makers an approach to reach an agreement when the partners decide to move from Kanban to DBR in a bid to increase the overall net profit in supply chains operating in a challenging noise scenario

A multivariate approach for multi-step demand forecasting in assembly industries: Empirical evidence from an automotive supply chain

PreprintDemand forecasting works as a basis for operating, business and production planning decisions in many supply chain contexts. Yet, how to accurately predict the manufacturer's demand for components in the presence of end-customer demand uncertainty remains poorly understood. Assigning the proper order quantities of components to suppliers thus becomes a nontrivial task, with a significant impact on planning, capacity and inventory-related costs. This paper introduces a multivariate approach to predict manufacturer's demand for components throughout multiple forecast horizons using different leading indicators of demand shifts. We compare the autoregressive integrated moving average model with exogenous inputs (ARIMAX) with Machine Learning (ML) models. Using a real case study, we empirically evaluate the forecasting and supply chain performance of the multivariate regression models over the component's life-cycle. The experiments show that the proposed multivariate approach provides superior forecasting and inventory performance compared with traditional univariate benchmarks. Moreover, it reveals applicable throughout the component's life-cycle, not just to a single stage. Particularly, we found that demand signals at the beginning of the life-cycle are predicted better by the ARIMAX model, but it is outperformed by ML-based models in later life-cycle stages.INCT-EN - Instituto Nacional de Ciência e Tecnologia para Excitotoxicidade e Neuroproteção(UIDB/00319/2020

Supply Chain Optimization for Sourced Production

Abstract. Title: Supply Chain Optimization – for Sourced Production. Authors: Patricia Möller and Andreas Paulsson. Tutors: Jan Eskil Hollen – Business Developer, Lilleborg as, Orkla, Everth Larsson – Department of Industrial Management and Logistics, Division of Engineering Logistics, Lund University, Carl-Henric Nilsson – Department of Economics and Business Administration, School of economics and management, Lund University. Problem: To source components from China is less expensive than setting up and running an own plant in any western country, but sourcing from low cost countries is related to challenges regarding business culture, logistics, quality and supply chain management. Cultural differences can make operations run less smoothly and the number of warehouses and transports need to be investigated. Communication processes must be reengineered and established, quality controls become a factor of outmost significance and the management of the entire supply chain needs to be intensified. Purpose: The purpose of this thesis is to investigate and propose how supply chain optimization for sourced production should be addressed. To achieve practical relevance a case study is performed of Lilleborg and their sourcing of components from China. Method: An inductive approach has been applied when conducting the study. The work process has been iterative and empirical qualitative data has been gathered through semi-structured interviews and literature studies. Conclusions: By applying a framework that consists of empirics and several relevant theories that form a cohesive and coherent tower towards set of objectives is the optimal strategic behavior for optimizing a supply chain according to this study

Models for Flexible Supply Chain Network Design

Arguably Supply Chain Management (SCM) is one of the central problems in Operations Research and Management Science (OR/MS). Supply Chain Network Design (SCND) is one of the most crucial strategic problems in the context of SCM. SCND involves decisions on the number, location, and capacity, of production/distribution facilities of a manufacturing company and/or its suppliers operating in an uncertain environment. Specifically, in the automotive industry, manufacturing companies constantly need to examine and improve their supply chain strategies due to uncertainty in the parameters that impact the design of supply chains. The rise of the Asian markets, introduction of new technologies (hybrid and electric cars), fluctuations in exchange rates, and volatile fuel costs are a few examples of these uncertainties. Therefore, our goal in this dissertation is to investigate the need for accurate quantitative decision support methods for decision makers and to show different applications of OR/MS models in the SCND realm. In the first technical chapter of the dissertation, we proposed a framework that enables the decision makers to systematically incorporate uncertainty in their designs, plan for many plausible future scenarios, and assess the quality of service and robustness of their decisions. Further, we discuss the details of the implementation of our framework for a case study in the automotive industry. Our analysis related to the uncertainty quantification, and network's design performance illustrates the benefits of using our framework in different settings of uncertainty. Although this chapter is focused on our case study in the automotive industry, it can be generalized to the SCND problem in any industry. We have outline the shortcomings of the current literature in incorporating the correlation among design parameters of the supply chains in the second technical chapter. In this chapter, we relax the traditional assumption of knowing the distribution of the uncertain parameters. We develop a methodology based on Distributionally Robust Optimization (DRO) with marginal uncertainty sets to incorporate the correlation among uncertain parameters into the designing process. Further, we propose a delayed generation constraint algorithm to solve the NP-hard correlated model in significantly less time than that required by commercial solvers. Further, we show that the price of ignoring this correlation in the parameters increases when we have less information about the uncertain parameters and that the correlated model gives higher profit when exchange rates are high compared to the stochastic model (with the independence assumption). We extended our models in previous chapters by presenting capacity options as a mechanism to hedge against uncertainty in the input parameters. The concept of capacity options similar to financial options constitute the right, but not the obligation, to buy more commodities from suppliers with a predetermined price, if necessary. In capital-intensive industries like the automotive industry, the lost capital investment for excess capacity and the opportunity costs of underutilized capacity have been important drivers for improving flexibility in supply contracts. Our proposed mechanism for high tooling cost parts decreases the total costs of the SCND and creates flexibility within the structure of the designed SCNs. Moreover, we draw several insights from our numerical analyses and discuss the possibility of price negotiations between suppliers and manufacturers over the hedging fixed costs and variable costs. Overall, the findings from this dissertation contribute to improve the flexibility, reliability, and robustness of the SCNs for a wide-ranging set of industries.PHDIndustrial & Operations EngineeringUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttps://deepblue.lib.umich.edu/bitstream/2027.42/145819/1/nsalehi_1.pd