The value of coordination in a two echelon supply chain: Sharing information, policies and parameters.

We study a coordination scheme in a two echelon supply chain. It involves sharing details of replenishment rules, lead-times, demand patterns and tuning the replenishment rules to exploit the supply chain's cost structure. We examine four different coordination strategies; naïve operation, local optimisation, global optimisation and altruistic behaviour on behalf of the retailer. We assume the retailer and the manufacturer use the Order-Up-To policy to determine replenishment orders and end consumers demand is a stationary i.i.d. random variable. We derive the variance of the retailer's order rate and inventory levels and the variance of the manufacturer's order rate and inventory levels. We initially assume that costs in the supply chain are directly proportional to these variances (and later the standard deviations) and investigate the options available to the supply chain members for minimising costs. Our results show that if the retailer takes responsibility for supply chain cost reduction and acts altruistically by dampening his order variability, then the performance enhancement is robust to both the actual costs in the supply chain and to a naïve or uncooperative manufacturer. Superior performance is achievable if firms coordinate their actions and if they find ways to re-allocate the supply chain gain.Bullwhip; Global optimisation; Inventory variance; Local optimisation; Supply chains; Studies; Coordination; Supply chain; IT; Replenishment rule; Rules; Demand; Patterns; Cost; Structure; Strategy; Retailer; Policy; Order; Variance; Inventory; Costs; Options; Variability; Performance; Performance enhancement; Firms;

Mean-Variance Analysis of Supply Chain Contracts

Institute of Textiles and Clothin

Transport contract optimization under information asymmetry: an example

The present paper shows why information asymmetry and bivariate stochastic demand and spot price induce different behaviours and economic inefficiency in a carrier – shipper relationship. An example is offered of a single period, single echelon, shipper-carrier transport model where demand addressed to the shipper and the spot transport price, two exogenous stochastic variables, follow a bivariate exponential probability distribution function. We evaluate the objective functions of the carrier and shipper over one period reiterated with a mix of long-term and short-term procurement strategies under five scenarios of information sharing. Some clues as to ways of solving for other types of bivariates are provided.supply chain management, coordination, information sharing, decision anylisis, bivariate statistics

Quantitative analysis of multi-periodic supply chain contracts with options via stochastic programming

We propose a stochastic programming approach for quantitative analysis of supply contracts, involving flexibility, between a buyer and a supplier, in a supply chain framework. Specifically, we consider the case of multi-periodic contracts in the face of correlated demands. To design such contracts, one has to estimate the savings or costs induced for both parties, as well as the optimal orders and commitments. We show how to model the stochastic process of the demand and the decision problem for both parties using the algebraic modeling language AMPL. The resulting linear programs are solved with a commercial linear programming solver; we compute the economic performance of these contracts, giving evidence that this methodology allows to gain insight into realistic problems.stochastic programming; supply contract; linear programming; modeling software; decision tree

Integration and coordination in after-sales service logistics

Maintenance and after-sales service logistics are important disciplines that have received considerable attention both in practice and in the scientific literature. This attention is related to the often high investments and revenues associated with capital-intensive assets in technically advanced business environments. Different maintenance services such as inspections and preventive maintenance activities are executed with the goal to maximize the availability of these expensive assets. However, unavoidable failures may still happen, which means that, in addition to preventive maintenance and services, repair actions (corrective maintenance) are necessary. Spare parts, service engineers and tools are typically the main resources for executing the repair actions and their availability has a major impact on overall system downtime. In this dissertation, we analyze a multi-resource after-sales service supply chain consisting of a service provider and an emergency supplier. The service provider is contractually responsible for the timely repair of some randomly failing capital intensive assets. To execute a repair, the service provider needs both service engineers and spare parts to replace the malfunctioning parts. In case of spare parts stock out, the service provider can either wait for the regular replenishment of parts or decide to hand over the entire repair call to an emergency supplier. For the latter case, a contract between the service provider and the emergency supplier is necessary to specify the compensation. In the first part of this dissertation, we focus on the optimal integrated planning of spare parts and engineers, considering an asset availability constraint. We evaluate the system performance using Markov chain analysis and queueing models, and employ different optimization algorithms to jointly determine the optimal capacity of the resources. This integrated planning results in considerable cost savings compared to the separate planning of spare parts and engineers. In the second part, we investigate the best contract the supplier can offer to the service provider. Furthermore, we propose different coordinated contracts to achieve optimal revenues for both partners in this after-sales service supply chain, under both full and asymmetric information scenarios. Cooperative games, the dominance of one party over the other (Stackelberg game), and information sharing aspects are the tools included in the second part of this dissertation

Supply chain dynamics

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2003.Includes bibliographical references (p. 121-123).The strong bargaining power of major retailers and the higher requirements for speed, service excellence and customization have significantly contributed to transform the Supply Chain Management. These increasing challenges call for an integrated and dynamic Supply Chain Management and for a better integration and alignment with key customers, in order to reduce the firm's time-to-market and build competitive advantage. The thesis aims at providing the partner company, a major player in the consumer goods industry, with a more robust and efficient vendor managed inventory practice, so that the partner can determine the optimum inventory level to satisfy turnover, service level and lead time requirements, whereas minimizing lost sales and total costs in the system. The team developed a Supply Chain Dynamics framework to help the partner to establish new service level strategies, strongly oriented to the strategic importance of its products and customers, and to map the key system-wide drivers that impact the overall number of inventory turns, service level and total costs. Additionally, in order to run simulations and estimate the outcomes of the proposed recommendations, the team developed a "Multi-Echelon" simulator and used a commercial "Supply Chain Dynamics" simulator.by Ricardo Wagner Lopes Barbosa [and] Edward Fan.M.Eng.in Logistic