Production Smoothing and Cost Performance in a Production-inventory System
Loading...
Date
2017
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Tomas Bata University in Zlin
Abstract
This paper considers a decentralized two-echelon supply chain: a single retailer holds finished
goods inventory to meet customer demand and a single manufacturer produces the retailer’s
replenishment orders for a single item on a make-to-order basis. The finite production capacity
in each period is considered. The manufacturer operates close to this production capacity. In this
setting, the retailer’s order decision has a direct impact on the manufacturer’s production utilization. Most inventory-focused literature research control inventory levels and allow production
levels to vary substantially each period. The manufacturer, however, prefers a stable level of
production, i.e. a smooth order pattern from the retailer.
Competitiveness of a supply chain is set by its performance as a whole. In a decentralized chain,
each link focuses on its own interests. Can the supplier pursuing his/her own goals improve the
performance of the whole chain? In this paper, we explore the effects of production smoothing
on total system per-unit costs while considering inventory as well as production related costs.
Description
Subject(s)
production-inventory system, supply chain, base-stock policy, total system costs
Citation
ISSN
1804-171X