Coordinating a two-echelon supply chain under inflation and time value of money

In the current global economic scenario, inflation plays a vital role in deciding optimal pricing of goods in any business entity. This paper develops a two-echelon (manufacturer-buyer) supply chain model taking into account inflation and time value of money. The present value of the total cost of the supply chain is derived when the manufacturer produces a number of lots, the sum of which is equal to the buyer’s total demand over a time horizon and the manufacturer’s each production lot is delivered to the buyer in n shipments. The optimal solution of the model is obtained for a numerical example after some adjustments (required to exhibit feasibility) in the derived solution. Sensitivity analysis is also carried out in order to examine the effects of changes in model-parameters on the optimal solution

Supply chain finance for ameliorating and deteriorating products: a systematic literature review

Ameliorating and deteriorating products, or, more generally, items that change value over time, present a high sensitiveness to the surrounding environment (e.g., temperature, humidity, and light intensity). For this reason, they should be properly stored along the supply chain to guarantee the desired quality to the consumers. Specifically, ameliorating items face an increase in value if there are stored for longer periods, which can lead to higher selling price. At the same time, the costumers’ demand is sensitive to the price (i.e., the higher the selling price the lower the final demand), sensitiveness that is related to the quality of the products (i.e., lower sensitiveness for high-quality products). On the contrary, deteriorating items lose quality and value over time which result in revenue losses due to lost sales or reduced selling price. Since these products need to be properly stored (i.e., usually in temperature- and humidity-controlled warehouses) the holding costs, which comprise also the energy costs, may be particularly relevant impacting on the economic, environmental, and social sustainability of the supply chain. Furthermore, due to the recent economic crisis, companies (especially, small and medium enterprises) face payment difficulties of customers and high volatility of resources prices. This increases the risk of insolvency and on the other hand the financing needs. In this context, supply chain finance emerged as a mean for efficiency by coordinating the financial flow and providing a set of financial schemes aiming at optimizing accounts payable and receivable along the supply chain. The aim of the present study is thus to investigate through a systematic literature review the two main themes presented (i.e., inventory management models for products that change value over time, and financial techniques and strategies to support companies in inventory management) to understand if any financial technique has been studied for supporting the management of this class of products and to verify the existing literature gap

An Integrated Model with Variable Production and Demand Rate under Inflation

AbstractIn this article, an integrated model is developed in which a manufacturer purchases raw materials from a supplier, and then produces finished products/goods, after that delivers them to a buyer. In the intended model production rate is assumed as a function of demand rate and customer demand rate is time dependent. To make the model more realistic the effect of inflation and time value of money is also taken into consideration. The concept of the model is illustrated through the numerical example and sensitivity analysis with respect to the system parameters is also performed

Efficient near-optimal procedures for some inventory models with backorders-lost sales mixture and controllable lead time, under continuous or periodic review

This paper considers a number of inventory models with backorders-lost sales mixture, stockout costs, and controllable lead time. The lead time is a linear function of the lot size and includes a constant term that is made of several components. These lot-size-independent components are assumed to be controllable. Both single- and double-echelon inventory systems, under periodic or continuous review, are considered. To authors knowledge, these models have never been previously studied in literature. The purpose of this paper is to analyse and optimize these novel inventory models. The optimization is carried out by means of heuristics that work on an ad hoc approximation of the cost functions. This peculiarity permits to exploit closed-form expressions that make the optimization procedure simpler and more readily applicable in practice than standard approaches. Finally, numerical experiments investigate the efficiency of the proposed heuristics and the sensitivity of the developed models

Improving supply chain profit through reverse factoring: A new multi-suppliers single-vendor joint economic lot size model

3siSupply chain finance has been gaining attention in theory and practice. A company’s financial position affects its performance and survivability in dynamic and volatile markets. Those that have weak financial performance are vulnerable when operating in environments that are uncertain and financially unstable. Companies adopt various solutions and techniques to manage, effectively and efficiently, the flow of money to and from its suppliers and buyers. Reverse factoring is an innovative technique in supply chain financing. This paper develops a joint economic lot size model where a vendor coordinates operational and financial decisions with its multiple suppliers through the establishment of a reverse factoring arrangement. The creditworthy vendor systematically informs a financial institution (e.g., bank) of payment obligations to selected suppliers, enabling the latter to borrow against the value of the relevant accounts receivable at low interest (borrowing) rates. The paper also presents a numerical example and a sensitivity analysis to illustrate the behavior of the model and to compare the economic and operational performance of a supply chain with and without a reverse factoring agreement. The results show that the establishment of a reverse factoring agreement within the supply chain improves the economic performance and impacts on the operational decisions.openopenMarchi B.; Zanoni S.; Jaber M.Y.Marchi, B.; Zanoni, S.; Jaber, M. Y

Optimising replenishment policy in an integrated supply chain with controllable lead time and backorders-lost sales mixture

This paper aims to optimize the inventory replenishment policy in an integrated supply chain consisting of a single supplier and a single buyer. The system under consideration has the features such as backorders-lost sales mixture, controllable lead time, stochastic demand, and stockout costs. The underlying problem has not been studied in the literature. We present a novel approach to formulate the optimization problem, which is able to satisfy the constraint on the number of admissible stockouts per time unit. To solve the optimization problem, we propose two algorithms: an exact algorithm and a heuristic algorithm. These two algorithms are developed based on some analytical properties that we established by analysing the cost function in relation to the decision variables. The heuristic algorithm employs an approximation technique based on an ad-hoc Taylor series expansion. Extensive numerical experiments are provided to demonstrate the effectiveness of the proposed algorithms

Modeling inventory and responsiveness costs in a supply chain

Evaluation of supply chain performance is often complicated by the various interrelationships that exist within the network of suppliers. Currently many supply chain metrics cannot be analytically determined. Instead, metrics are derived from monitoring historical data, which is commonly referred to as Supply Chain Analytics. With these analytics it is possible to answer questions such as: What is the inventory cost distribution across the chain? What is the actual inventory turnover ratio? What is the cost of demand changes to individual suppliers? However, this approach requires a significant amount of historical data which must be continuously extracted from the associated Enterprise Resources Planning (ERP) system. In this dissertation models are developed for evaluating two Supply Chain metrics, as an alternative to the use of Supply Chain Analytics. First, inventory costs are estimated by supplier in a deterministic (Q , R, δ )2 supply chain. In this arrangement each part has two sequential reorder (R) inventory locations: (i) on the output side of the seller and (ii) on the input side of the buyer. In most cases the inventory policies are not synchronized and as a result the inventory behavior is not easily characterized and tends to exhibit long cycles. This is primarily due to the difference in production rates ( δ), production batch sizes, and the selection of supply order quantities (Q) for logistics convenience. The (Q , R, δ )2 model that is developed is an extension of the joint economic lot size (JELS) model first proposed by Banerjee (1986). JELS is derived as a compromise between the seller\u27s and the buyer\u27s economic lot sizes and therefore attempts to synchronize the supply policy. The (Q , R, δ )2 model is an approximation since it approximates the average inventory behavior across a range of supply cycles. Several supply relationships are considered by capturing the inventory behavior for each supplier in that relationship. For several case studies the joint inventory cost for a supply pair tends to be a stepped convex function. Second, a measure is derived for responsiveness of a supply chain as a function of the expected annual cost of making inventory and production capacity adjustments to account for a series of significant demand change events. Modern supply chains are expected to use changes in production capacity (as opposed to inventory) to react to significant demand changes. Significant demand changes are defined as shifts in market conditions that cannot be buffered by finished product inventory alone and require adjustments in the supply policy. These changes could involve a ± 25% change in the uniform demand level. The research question is what these costs are and how they are being shared within the network of suppliers. The developed measure is applicable in a multi-product supply chain and considers both demand correlations and resource commonality. Finally, the behavior of the two developed metrics is studied as a function of key supply chain parameters (e.g., reorder levels, batch sizes, and demand rate changes). A deterministic simulation model and program was developed for this purpose