Industrial Engineering and Management Systems

Korean Institute of Industrial Engineers (대한산업공학회)
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Optimal Ordering Policy in Dual-Sourcing Supply Chain Considering Supply Disruptions and Demand Information

  • Watanabe, Naoki (Graduate School of Engineering, Osaka Prefecture University) ;
  • Kusukawa, Etsuko (Graduate School of Engineering, Osaka Prefecture University)
  • Received : 2015.01.02
  • Accepted : 2015.05.28
  • Published : 2015.06.30
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Abstract

It is necessary for retailers to determine the optimal ordering policy of products considering supply disruptions due to a natural disaster and a production process failure as quality and machine breakdowns. Under the situation, a dualsourcing supply chain (DSSC) is one of effective SC for retailers to order products reliably. This paper proposes the optimal ordering policy of a product in a DSSC with a retailer and two manufacturers. Two manufacturers may face supply disruptions due to a natural disater and a production process failure after they received the retailer's order of products. Here, two scenarios of demand information of products are assumed: (i) the demand distribution is known (ii) mean and variance of the demand are known. Under above situations, two types of DSSC are discussed. Under a decentralized DSSC (DSC), a retailer determines the optimal ordering policy to maximize his/her total expected profit. Under the integrated DSSC (ISC), the optimal ordering policy is determined to maximize the whole system's total expected profit. Numerical analysis investigates how demand information and supply disruptions affect the optimal decisions under DSC and ISC. Besides, profitability of supply chain coordination adjusting the wholesale price is evaluated to encourage the optimal decision under ISC.

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References

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