An enhanced approximation mathematical model inventorying items in a multi-echelon system under a continuous review policy with probabilistic demand and lead-time

An inventory system attempts to balance between overstock and understock to reduce the total cost and achieve customer demand in a timely manner. The inventory system is like a hidden entity in a supply chain, where a large complete network synchronizes a series of interrelated processes for a manufacturer, in order to transform raw materials into final products and distribute them to customers. The optimality of inventory and allocation policies in a supply chain for a cement industry is still unknown for many types of multi-echelon inventory systems. In multi-echelon networks, complexity exists when the inventory issues appear in multiple tiers and whose performances are significantly affected by the demand and lead-time. Hence, the objective of this research is to develop an enhanced approximation mathematical model in a multi-echelon inventory system under a continuous review policy subject to probabilistic demand and lead-time. The probability distribution function of demand during lead-time is established by developing a new Simulation Model of Demand During Lead-Time (SMDDL) using simulation procedures. The model is able to forecast future demand and demand during lead-time. The obtained demand during lead-time is used to develop a Serial Multi-echelon Inventory (SMEI) model by deriving the inventory cost function to compute performance measures of the cement inventory system. Based on the performance measures, a modified distribution multi-echelon inventory (DMEI) model with the First Come First Serve (FCFS) rule (DMEI-FCFS) is derived to determine the best expected waiting time and expected number of retailers in the system based on a mean arrival rate and a mean service rate. This research established five new distribution functions for the demand during lead-time. The distribution functions improve the performance measures, which contribute in reducing the expected waiting time in the system. Overall, the approximation model provides accurate time span to overcome shortage of cement inventory, which in turn fulfil customer satisfaction

Inventory Signals

Among practitioners, inventory is often thought to be the root of all evil in operations management. The stock market hates it, the media abhors it, and managers have come to fear it. But high inventory levels can also be the result of strategic buying and high-availability strategies. The problem is that when the market sees lots of inventory, it cannot tell whether it is because of poor or smart operations. We hypothesize that inventory has a signaling role. In our model, publicly- traded firms use inventory levels to signal their operational competence to the market. There is a separating equilibrium that leads some firms to maintain inventory levels below what their capability could achieve. We offer this as one explanation why, for example, stock-outs are pervasive even among operationally competent firms. We provide empirical evidence for the assumptions behind this inventory signaling hypothesis: (1) the market cannot tell the difference between “good” and “bad” inventory; and (2) the counterfactual: the market punishes firms when it can tell that their inventory is bad, such as when they write off supplies. Consistent with these assumptions, we find that inventory levels do not explain firm value. And on average, stocks suffer an abnormal negative return of 7% in the month of announcing inventory write-offs.Inventory, signaling, operations management, asymmetric information

Value of supplier's capacity information in a two-echelon supply chain

Cataloged from PDF version of article.In traditional supply chain models it is generally assumed that full information is available to all parties involved. Although this seems reasonable, there are cases where chain members are independent agents and possess different levels of information. In this study, we analyze a two-echelon, single supplier-multiple retailers supply chain in a single-period setting where the capacity of the supplier is limited. Embedding the lack of information about the capacity of the supplier in the model, we aim to analyze the reaction of the retailers, compare it with the full-information case, and assess the value of information and the effects of information asymmetry using game theoretic analysis. In our numerical studies, we conclude that the value of information is highly dependent on the capacity conditions and estimates of the retailers, and having information is not necessarily beneficial to the retailers

Value of supplier's capacity information in a two-echelon supply chain

In traditional supply chain models it is generally assumed that full information is available to all parties involved. Although this seems reasonable, there are cases where chain members are independent agents and possess different levels of information. In this study, we analyze a two-echelon, single supplier-multiple retailers supply chain in a single-period setting where the capacity of the supplier is limited. Embedding the lack of information about the capacity of the supplier in the model, we aim to analyze the reaction of the retailers, compare it with the full-information case, and assess the value of information and the effects of information asymmetry using game theoretic analysis. In our numerical studies, we conclude that the value of information is highly dependent on the capacity conditions and estimates of the retailers, and having information is not necessarily beneficial to the retailers

Study on Buyback Contract in Supply Chain With a Loss-Averse Supplier and Multiple Loss-Averse Retailers Under Stockout Loss Situation

According to the prospect theory and the loss-aversion function, this paper developers the buyback contract model in a two-stage supply chain with a loss-averse supplier and multiple loss-averse retailers. Under the stockout loss setting, we analyze the effect of the loss aversion on the behavior from the retailers and the supplier, and then the buyback contract has been shown to be able to coordinate the supply chain. Furthermore, the number of retailers and loss aversion coefficient meet a certain range, there will be a unique optimal buyback price to achieve supply chain coordination

Supply Chain Coordination Contracts under Double Sided Disruptions Simultaneously

Supply chain coordination models are developed in a two-echelon supply chain with double sided disruptions. In a supply chain system, the supplier may suffer from the product cost disruption and the retailer suffers from the demand disruption simultaneously. The purpose of this study is to design proper supply chain contracts, under which the supply chain with double sided disruption can be coordinated. Firstly, the centralized decision-making models are applied to find the optimal price and quantity under three cases as the baseline. The different cases are divided by the different relationship between the product cost disruption and the demand disruption. Secondly, two different types of contracts are introduced to coordinate the whole supply chain. One is all-unit wholesale quantity discount policy (AQDP) contract, and the other one is capacitated linear pricing policy (CLPP) contract. And it is found out that the gap between the demand disruption and the product cost disruption is the key factor to influence the supply chain coordination. Some numerical examples and sensitivity analysis are given to illustrate the models. The AQDP contracts are listed out under different cases to show how to use it under double sided disruptions

Blockchain-Coordinated Frameworks for Scalable and Secure Supply Chain Networks

Supply chains have progressed through time from being limited to a few regional traders to becoming complicated business networks. As a result, supply chain management systems now rely significantly on the digital revolution for the privacy and security of data. Due to key qualities of blockchain, such as transparency, immutability and decentralization, it has recently gained a lot of interest as a way to solve security, privacy and scalability problems in supply chains. However conventional blockchains are not appropriate for supply chain ecosystems because they are computationally costly, have a limited potential to scale and fail to provide trust. Consequently, due to limitations with a lack of trust and coordination, supply chains tend to fail to foster trust among the network’s participants. Assuring data privacy in a supply chain ecosystem is another challenge. If information is being shared with a large number of participants without establishing data privacy, access control risks arise in the network. Protecting data privacy is a concern when sending corporate data, including locations, manufacturing supplies and demand information. The third challenge in supply chain management is scalability, which continues to be a significant barrier to adoption. As the amount of transactions in a supply chain tends to increase along with the number of nodes in a network. So scalability is essential for blockchain adoption in supply chain networks. This thesis seeks to address the challenges of privacy, scalability and trust by providing frameworks for how to effectively combine blockchains with supply chains. This thesis makes four novel contributions. It first develops a blockchain-based framework with Attribute-Based Access Control (ABAC) model to assure data privacy by adopting a distributed framework to enable fine grained, dynamic access control management for supply chain management. To solve the data privacy challenge, AccessChain is developed. This proposed AccessChain model has two types of ledgers in the system: local and global. Local ledgers are used to store business contracts between stakeholders and the ABAC model management, whereas the global ledger is used to record transaction data. AccessChain can enable decentralized, fine-grained and dynamic access control management in SCM when combined with the ABAC model and blockchain technology (BCT). The framework enables a systematic approach that advantages the supply chain, and the experiments yield convincing results. Furthermore, the results of performance monitoring shows that AccessChain’s response time with four local ledgers is acceptable, and therefore it provides significantly greater scalability. Next, a framework for reducing the bullwhip effect (BWE) in SCM is proposed. The framework also focuses on combining data visibility with trust. BWE is first observed in SC and then a blockchain architecture design is used to minimize it. Full sharing of demand data has been shown to help improve the robustness of overall performance in a multiechelon SC environment, especially for BWE mitigation and cumulative cost reduction. It is observed that when it comes to providing access to data, information sharing using a blockchain has some obvious benefits in a supply chain. Furthermore, when data sharing is distributed, parties in the supply chain will have fair access to other parties’ data, even though they are farther downstream. Sharing customer demand is important in a supply chain to enhance decision-making, reduce costs and promote the final end product. This work also explores the ability of BCT as a solution in a distributed ledger approach to create a trust-enhanced environment where trust is established so that stakeholders can share their information effectively. To provide visibility and coordination along with a blockchain consensus process, a new consensus algorithm, namely Reputation-based proof-of cooperation (RPoC), is proposed for blockchain-based SCM, which does not involve validators to solve any mathematical puzzle before storing a new block. The RPoC algorithm is an efficient and scalable consensus algorithm that selects the consensus node dynamically and permits a large number of nodes to participate in the consensus process. The algorithm decreases the workload on individual nodes while increasing consensus performance by allocating the transaction verification process to specific nodes. Through extensive theoretical analyses and experimentation, the suitability of the proposed algorithm is well grounded in terms of scalability and efficiency. The thesis concludes with a blockchain-enabled framework that addresses the issue of preserving privacy and security for an open-bid auction system. This work implements a bid management system in a private BC environment to provide a secure bidding scheme. The novelty of this framework derives from an enhanced approach for integrating BC structures by replacing the original chain structure with a tree structure. Throughout the online world, user privacy is a primary concern, because the electronic environment enables the collection of personal data. Hence a suitable cryptographic protocol for an open-bid auction atop BC is proposed. Here the primary aim is to achieve security and privacy with greater efficiency, which largely depends on the effectiveness of the encryption algorithms used by BC. Essentially this work considers Elliptic Curve Cryptography (ECC) and a dynamic cryptographic accumulator encryption algorithm to enhance security between auctioneer and bidder. The proposed e-bidding scheme and the findings from this study should foster the further growth of BC strategies

Collaboration and information sharing in dyadic supply chains: A literature review over the period 2000–2012

Information sharing and coordination between the agents of a supply chain are considered to be an effective strategy for improving its global performance. This paper presents an updated review of current literature examining the impacts of information sharing and collaboration strategies on supply chain dynamic performance, with particular focus on dyadic structure. To achieve this, a systematic review approach is followed over the period 2000–2012, intending to ensure that the process is reproducible and auditable. A comprehensive taxonomy is also presented, highlighting strategic and operational impacts of collaborative structures. The analysis revealed that collaborative and information sharing issues underlined 10 years ago still require further attention from researchers

Strategic Inventories in a Supply Chain with Vertical Control and Downstream Cournot Competition

Strategic Inventory (SI) has been an area of increased interest in theoretical supply chain literature recently. Most of the work so far however, has only considered a supply chain without downstream competition between retailers. Competition is ubiquitous in most market situations, hence, interactions between SI and retailer competition merits study as a first step in bringing the conversations and insights from this stream of literature to the real world. We present here a two-period and a three-period model of one manufacturer supplying an identical product to two retailers who form a Cournot duopoly. We also study a Commitment contract, where the manufacturer commits to all the selling seasons’ wholesale prices at the beginning of the 1st period. Commitment contracts have been shown previously to eliminate SI carriage over two selling seasons in the absence of retailer competition. We aim to deduce if this type of contract has the same effect in the presence of downstream competition. We determine closed-form Nash Equilibrium decision variable values for each of these models using game-theoretic modeling, a price-dependent linear demand function, and backward induction. We find that, the introduction of downstream Cournot duopoly competition leads to lower profits for both the manufacturer and retailer. This holds, whether the number of selling season is two or three. Consumer Surplus is also uniformly lower under retailer competition, compared to a downstream monopoly supply chain. When we try to deduce the effect of SI carriage under Cournot duopoly competition, by comparing an SC with Cournot duopoly competition and SI allowed between periods, to a similar SC with a Cournot duopoly downstream and a static, repeating, one-shot game in each period, with no SI carried – we find again that manufacturer and retailer profits are both lower when SI carriage is allowed. This holds whether the number of selling seasons is two or three. Consumer Surplus is also lower uniformly over both two and three selling seasons. Under a Commitment contract, over two selling seasons, the manufacturer ends up with an advantage, making a higher profit with downstream retailer competition, than compared to supplying to a monopoly downstream under the same contract. The retailers, while competing as a Cournot duopoly, are not able to use the relative advantage that comes from a Commitment contract to make a higher profit, as they are, when the downstream is a single retailer monopoly. The consumer also is disadvantaged by the introduction of downstream Cournot competition under a Commitment contract. When we compare a manufacturer supplying to a Cournot duopoly downstream of retailers, with, and without a Commitment contract (dynamic ordering), we see that the manufacturer and consumer benefit under a Commitment contract, making higher profits, but the retailer is at a disadvantage. It would be an interesting extension of this work to generalize the results from two and three selling seasons, presented here, to the “n” period case. It would also be benefi-cial to run empirical studies in real-world supply chains to validate if and to what extent the insights developed by this kind of game-theoretic modeling hold in a real-world supply chain setting. Development of contracts that are more effective than a Commitment con-tract in coordinating this supply chain would be another possible area for further research

Supply Chain

Traditionally supply chain management has meant factories, assembly lines, warehouses, transportation vehicles, and time sheets. Modern supply chain management is a highly complex, multidimensional problem set with virtually endless number of variables for optimization. An Internet enabled supply chain may have just-in-time delivery, precise inventory visibility, and up-to-the-minute distribution-tracking capabilities. Technology advances have enabled supply chains to become strategic weapons that can help avoid disasters, lower costs, and make money. From internal enterprise processes to external business transactions with suppliers, transporters, channels and end-users marks the wide range of challenges researchers have to handle. The aim of this book is at revealing and illustrating this diversity in terms of scientific and theoretical fundamentals, prevailing concepts as well as current practical applications