Coordinating a three-level supply chain with learning-based continuous improvement
AbstractLearning 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 InfoArticle provided by Elsevier in its journal International Journal of Production Economics.
Volume (Year): 127 (2010)
Issue (Month): 1 (September)
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Web page: http://www.elsevier.com/locate/ijpe
Learning Forgetting Set-up reduction Lot-sizing Product quality Supply chain coordination Quantity discounts;
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