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Coordinating a three-level supply chain with learning-based continuous improvement

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  • Jaber, Mohamad Y.
  • Bonney, Maurice
  • Guiffrida, Alfred L.
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    Abstract

    Learning curve theory has been widely used as a managerial tool to describe and model product and process improvement. This paper investigates a three-level supply chain (supplier-manufacturer-retailer) where the manufacturing operations undergo a learning-based continuous improvement process. Improvements in the manufacturer's operation are characterized by enhanced capacity utilization, reductions in set-ups times, and improved product quality through the elimination of rework. As a result of these continuous improvements, the manufacturer can justify a production policy that is based on more frequent, smaller lot size production. For this production policy to be practical and not sub-optimal to the supply chain, the manufacturer must integrate its lot-sizing models with the replenishment policies of its upstream raw material suppliers and the demand requirements of its downstream customers (retailers). Mathematical models that achieve chain-wide lot-sizing integration are developed and solution procedures for the models are illustrated by numerical examples. The results demonstrate that learning-based improvements in set-up time and rework allow retailers to order in progressively smaller lot sizes as the manufacturer offers larger discounts and profits and that the entire supply chain benefits from implementing learning-based continuous quality improvements. The results also demonstrate that forgetting effects lead to increases in supply chain costs.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 127 (2010)
    Issue (Month): 1 (September)
    Pages: 27-38

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    Handle: RePEc:eee:proeco:v:127:y:2010:i:1:p:27-38

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    Web page: http://www.elsevier.com/locate/ijpe

    Related research

    Keywords: Learning Forgetting Set-up reduction Lot-sizing Product quality Supply chain coordination Quantity discounts;

    References

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    1. Goyal, Suresh K. & Gupta, Yash P., 1989. "Integrated inventory models: The buyer-vendor coordination," European Journal of Operational Research, Elsevier, vol. 41(3), pages 261-269, August.
    2. Jaber, Mohamad Y. & Kher, Hemant V. & Davis, Darwin J., 2003. "Countering forgetting through training and deployment," International Journal of Production Economics, Elsevier, vol. 85(1), pages 33-46, July.
    3. Leroy B. Schwarz & James E. Ward & Xin Zhai, 2006. "On the Interactions Between Routing and Inventory-Management Policies in a One-Warehouse N-Retailer Distribution System," Manufacturing & Service Operations Management, INFORMS, vol. 8(3), pages 253-272, September.
    4. Chiu, Huan Neng & Chen, Hsin Min, 2005. "An optimal algorithm for solving the dynamic lot-sizing model with learning and forgetting in setups and production," International Journal of Production Economics, Elsevier, vol. 95(2), pages 179-193, February.
    5. Jaber, Mohamad Y. & Sikstrom, Sverker, 2004. "A numerical comparison of three potential learning and forgetting models," International Journal of Production Economics, Elsevier, vol. 92(3), pages 281-294, December.
    6. Stan van Hoesel & H. Edwin Romeijn & Dolores Romero Morales & Albert P. M. Wagelmans, 2005. "Integrated Lot Sizing in Serial Supply Chains with Production Capacities," Management Science, INFORMS, vol. 51(11), pages 1706-1719, November.
    7. Fernando Bernstein & Fangruo Chen & Awi Federgruen, 2006. "Coordinating Supply Chains with Simple Pricing Schemes: The Role of Vendor-Managed Inventories," Management Science, INFORMS, vol. 52(10), pages 1483-1492, October.
    8. Zou, Xuxia & Pokharel, Shaligram & Piplani, Rajesh, 2008. "A two-period supply contract model for a decentralized assembly system," European Journal of Operational Research, Elsevier, vol. 187(1), pages 257-274, May.
    9. Jaber, Mohamad Y. & Bonney, Maurice, 2003. "Lot sizing with learning and forgetting in set-ups and in product quality," International Journal of Production Economics, Elsevier, vol. 83(1), pages 95-111, January.
    10. Kaijie Zhu & Rachel Q. Zhang & Fugee Tsung, 2007. "Pushing Quality Improvement Along Supply Chains," Management Science, INFORMS, vol. 53(3), pages 421-436, March.
    11. Jaber, Mohamad Y. & Bonney, Maurice, 1999. "The economic manufacture/order quantity (EMQ/EOQ) and the learning curve: Past, present, and future," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 93-102, March.
    12. Alamri, Adel. A. & Balkhi, Zaid T., 2007. "The effects of learning and forgetting on the optimal production lot size for deteriorating items with time varying demand and deterioration rates," International Journal of Production Economics, Elsevier, vol. 107(1), pages 125-138, May.
    13. Refik Güllü & Geert-Jan van Houtum & F. Zeynep Sargut & Nesim Erkip, 2005. "Analysis of a Decentralized Supply Chain Under Partial Cooperation," Manufacturing & Service Operations Management, INFORMS, vol. 7(3), pages 229-247, March.
    14. Jaber, M.Y. & Bonney, M. & Moualek, I., 2009. "Lot sizing with learning, forgetting and entropy cost," International Journal of Production Economics, Elsevier, vol. 118(1), pages 19-25, March.
    15. Jaber, Mohamad Y. & Bonney, Maurice, 2007. "Economic manufacture quantity (EMQ) model with lot-size dependent learning and forgetting rates," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 359-367, July.
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    Cited by:
    1. Hoque, M.A., 2011. "Generalized single-vendor multi-buyer integrated inventory supply chain models with a better synchronization," International Journal of Production Economics, Elsevier, vol. 131(2), pages 463-472, June.

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