Supply chain single vendor – Single buyer inventory model with price-dependent demand

Purpose: The aim of this article is developing an integrated production-inventory-marketing model for a two-stage supply chain. The demand rate is considered as the Iso-elastic decreasing function of the selling price. The main research goal of the article is to obtain the optimal values of the selling price, order quantity and number of shipments for the proposed model under independent and also joint optimization. In addition, the effects of the model’s parameters on the optimal solution are investigated. Design/methodology/approach: Mathematical modeling is used to obtain the joint total profit function of the supply chain. Then, the iterative solution algorithm is presented to solve the model and determine the optimal solution. Findings and Originality/value: It is observed that under joint optimization, the demand rate and the supply chain’s profit are higher than their values under independent optimization, especially for the more price sensitive demand. Therefore, coordination between the buyer and the vendor is advantageous for the supply chain. On the other hand, joint optimization will be less beneficial when there isn’t a significant difference between the buyer’s and the vendor’s holding costs. Originality/value: The contribution of the article is determining the ordering and pricing policy jointly in the supply chain, which contains one vendor and one buyer while the demand rate is the Iso-elastic function of the selling pricePeer Reviewe

Three-echelon supply chain delivery policy with trade credit consideration

In recent years, collaboration in supply chain approach widely discussed in the literature; but most have dealt with the two-echelon systems. This study focuses on the just-in-time delivery policy of three-echelon supply chain by collaborative approach, where any of the information from the supply chain is available to all the subsystems involved; manufacturer, distribution center and retailer. In the first part of the study a simple model has been developed for a three-echelon supply system that consists of a single manufacturer, a single distribution center and a single retailer. The other part of the study extends this model by considering a upstream integrated delivery supply chain system consisting of a single manufacturer, multiple distribution centers and multiple retailers. In both cases the retailer enjoys a permissible delay in payment. The joint annual cost of the supply chain is obtained by summing the annual relevant costs at all the subsystems. Using the convex property of the cost function, the optimum values of the decision values are initially obtained that minimizes the total cost. Then, these values are adjusted according to feasibility criteria of the credit conditions and other constraints using an algorithm. A numerical example illustrating the solution reveals that total supply chain cost is less by the presented collaborative approach compared to typical delivery policy. A sensitivity analysis also showed the robustness of the new model. This model considers lot-splitting and deferred payment simultaneously. That has not been studied for three-echelon system before. Future extension of this study involves assumption of random demand with cross-transfer delivery, unequal cycle time, shortage consideration, etc

Application of Optimization in Production, Logistics, Inventory, Supply Chain Management and Block Chain

The evolution of industrial development since the 18th century is now experiencing the fourth industrial revolution. The effect of the development has propagated into almost every sector of the industry. From inventory to the circular economy, the effectiveness of technology has been fruitful for industry. The recent trends in research, with new ideas and methodologies, are included in this book. Several new ideas and business strategies are developed in the area of the supply chain management, logistics, optimization, and forecasting for the improvement of the economy of the society and the environment. The proposed technologies and ideas are either novel or help modify several other new ideas. Different real life problems with different dimensions are discussed in the book so that readers may connect with the recent issues in society and industry. The collection of the articles provides a glimpse into the new research trends in technology, business, and the environment

Impact of economic inventory and payment policies on working capital optimization in purchase-to-pay processes

The thesis at hand includes eight chapter and is structured as follows: Following a brief introduction of the topic in Chapter 1, Chapter 2 provides a survey of literature reviews in the area of lot sizing. Its intention is to show which streams of research emerged from Harris' seminal lot size model, and which major achievements have been accomplished in the respective areas. It first develops the methodology and then descriptively analyzes the sample. Subsequently, a content-related classification scheme for lot sizing models is developed, and the reviews contained in the sample are discussed in light of this classification scheme. The analysis reveals that various extensions of Harris' lot size model have been developed over the years, such as lot sizing models that include multi-stage inventory systems, incentives, or productivity issues. The aims of such a tertiary study are the following: firstly, it helps primary researchers to position their own work in the literature, to reproduce the development of different types of lot sizing problems, and to find starting points if they intend to work in a new research direction. Secondly, the study identifies several topics that offer opportunities for future secondary research apart from the ones covered in this thesis. In the presence of a progressive payment scheme, the supplier offers a sequence of credit periods, where the interest rate that is charged on the outstanding balance usually increases from period to period. If a buyer faces a progressive trade credit scheme, various options for settling the unpaid balance exist, where the financial impact of each option depends on the current credit interest structure and the alternative investment conditions. Chapter 3 takes up this issue by generalizing the trade credit inventory model with progressive interest scheme by considering a) the case where the credit interest rate of the buyer may (but not necessarily has to) exceed the interest rate charged by the supplier, b) where the buyer has the option to settle the outstanding balance continuously within the credit periods, c) where compound interest accrues at the retailer, and d) bank loans are available as a substitute for the trade credit. In addition, some inaccuracies in earlier formulations of the effective interest cost are corrected. Subsequently, Chapter 4 studies and extends solution algorithms for deriving the optimal ordering and payment policies of a retailer on the condition that the supplier provides a progressive interest scheme. Based on the finding that the piecewise total cost functions are convex but not necessarily continuous, a modified solution algorithm is developed and collated with existing ones in the course of a simulation experiment. The results indicate that the modified algorithm can locate all optimal solutions and outperforms existing approaches. Chapters 5 and 6 further extend the scope of the analysis by considering models aimed at finding ordering and payment policies for a buyer with stock-dependent demand and a supplier that offers a progressive payment scheme. Such a setting can frequently be observed in retail stores where the demand rate is usually influenced by the amount of inventories displayed on the shelves. These chapters correct some errors in the formulation of previously published approaches and extend those works by assuming that the credit interest rate of the retailer may exceed the interest rate charged by the supplier. Several numerical examples illustrate the benefits of the suggested modifications. The results also illustrate the close linkage between operational and financial aspects in supply chain management, which should be considered by employing more integrated planning approaches. As decisions on the working capital structure of the company defined by an appropriate inventory and payment policy significantly influence future cash-flows and thus the temporal allocation of payments, they should also be evaluated in terms of long-term profitability by considering their net present value or equivalent measures. Especially in situations where trade credit agreements are used over a long period of time and where discount rates are varying, explicitly considering the time-value of money in inventory models helps to make them more realistic. This aspect is considered in Chapter 7 that studies the optimal ordering and payment policies of a buyer assuming that the supplier offers a progressive interest scheme. The models proposed enable decision makers to improve decision making and the results reveal that taking into account the temporal allocation of payments, the prevailing interest relation influences replenishment policies significantly. Finally, Chapter 8 studies a buyer sourcing a product from multiple suppliers under stochastic demand. The buyer uses a (Q,s) continuous review, reorder point, order quantity inventory control system to determine the size and timing of orders. Lead time is assumed to be deterministic and to vary linearly with the lot size, wherefore lead time and the associated stock-out risk may be influenced both by varying the lot size and the number of contracted suppliers. After presenting several mathematical models for a multiple supplier single buyer integrated inventory problem with stochastic demand and variable lead time, the impact of different delivery structures on the risk of incurring a stock-out during lead time and the required inventories is analyzed

Decentralized and centralized supply chains with trade credit option

The notion of a trade credit period is a common business practice, where a supplier allows a buyer a specified period to make a payment in full for a purchase made. The objective of this thesis is to explore the role of such a credit payment option in supply chain management. Towards this end, a two-echelon supply chain, consisting of a single supplier (e.g. manufacturer) and the cases of both a single and multiple buyers (e.g. retailers) is examined under decentralized (independent) and centralized (coordinated) decision making scenarios. The major emphasis of this research is limited to the case of a single product with price-sensitive deterministic, as well as stochastic market demand.The conditions under which a trade credit period should be offered and its appropriate length are determined from the supplier’s perspective under the decentralized case. Under the centralized decision scenario, the efficacy of a trade credit policy as a supply chain coordination mechanism is thoroughly analyzed and guidelines for pricing, production and delivery decisions are developed. The concepts developed in this study are illustrated via a number of numerical examples, in conjunction with thorough sensitivity analyses involving some selected problem parameters.The major contribution of this thesis is that we incorporate the pricing and inventory issues in supply chains with an endogenous credit payment period. This is the first study that examines the efficacy of trade credit option as a coordination mechanism. We propose a coordination mechanism that coordinates the supply chain, when a trade credit by itself is not sufficient to serve such a purpose, while preserving the benefits of a trade credit option. Also, this study is the first to examine the issues concerning trade credit under price sensitive stochastic demand. Another first for this work is the exploration of the implications of a trade credit policy in supply chains consisting of multiple competing retailers. The effects of the extent of competition and the market size on trade credit policy are evaluated. Our analyses lead to some important practical implications, to serve as managerial guidelines.Ph.D., Decision Sciences -- Drexel University, 201

The influence of financial conditions on optimal ordering and payment policies under progressive interest schemes

In many business-to-business transactions, the buyer is not required to pay immediately after the receipt of an order, but is instead allowed to postpone the payment to its suppliers for a certain period. In such a situation, the buyer can either settle the account at the end of the credit period or authorize the payment later, usually at the expense of interest that is charged by the supplier on the outstanding balance. Some payment terms, which are often referred to as trade credit contracts, contain progressive interest charges. In such cases, the supplier offers a sequence of credit periods, where the interest rate that is charged on the outstanding balance usually increases from period to period. If a buyer faces a progressive trade credit scheme, various options for settling the unpaid balance exist, where the financial impact of each option depends on the current credit interest structure and the alternative investment conditions. This paper studies the influence of different financial conditions in terms of alternative investment opportunities and credit interest structure on the optimal ordering and payment policies of a buyer on the condition that the supplier provides a progressive interest scheme. For this purpose, mathematical models are developed and analyzed

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

Integrated optimisation for production capacity, raw material ordering and production planning under time and quantity uncertainties based on two case studies

Abstract This paper develops a supply chain (SC) model by integrating raw material ordering and production planning, and production capacity decisions based upon two case studies in manufacturing firms. Multiple types of uncertainties are considered; including: time-related uncertainty (that exists in lead-time and delay) and quantity-related uncertainty (that exists in information and material flows). The SC model consists of several sub-models, which are first formulated mathematically. Simulation (simulation-based stochastic approximation) and genetic algorithm tools are then developed to evaluate several non-parameterised strategies and optimise two parameterised strategies. Experiments are conducted to contrast these strategies, quantify their relative performance, and illustrate the value of information and the impact of uncertainties. These case studies provide useful insights into understanding to what degree the integrated planning model including production capacity decisions could benefit economically in different scenarios, which types of data should be shared, and how these data could be utilised to achieve a better SC system. This study provides insights for small and middle-sized firm management to make better decisions regarding production capacity issues with respect to external uncertainty and/or disruptions; e.g. trade wars and pandemics.</jats:p

Designing multi-period supply chain network considering risk and emission: a multi-objective approach

This research formulates a multi-objective problem (MOP) for supply chain network (SCN) design by incorporating the issues of social relationship, carbon emissions, and supply chain risks such as disruption and opportunism. The proposed MOP includes three conflicting objectives: maximization of total profit, minimization of supply disruption and opportunism risks, and minimization of carbon emission considering a number of supply chain constraints. Furthermore, this research analyses the effect of social relationship levels between different tiers of SCN on the profitability, risk, and emission over the time. In this regard, we focus on responding to the following questions. (1) How does the evolving social relationship affect the objectives of the supply chain (SC)? (2) How do the upstream firms’ relationships affect the relationships of downstream firms, and how these relationships influence the objectives of the SC? (3) How does the supply disruption risk interact with the opportunism risk through supply chain relationships, and how these risks affect the objectives of the SC? (4) How do these three conflicting objectives trade-off? A Pareto-based multi-objective evolutionary algorithm–non-dominated sorting genetic algorithm-II (NSGA-II) has been employed to solve the presented problem. In order to improve the quality of solutions, tuning parameters of the NSGA-II are modulated using Taguchi approach. An illustrative example is presented to manifest the capability of the model and the algorithm. The results obtained evince the robust performance of the proposed MOP