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Reliability evaluation and adjustment of supply chain network design with demand fluctuations

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  • Hsu, Chaug-Ing
  • Li, Hui-Chieh
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    Abstract

    This study focuses on supply chain network design problems by considering economies of scale and demand fluctuations. A reliability evaluation method is developed to evaluate the performance of plants under demand fluctuations. In addition, two mathematical programming models are developed to determine the optimal adjustment decisions regarding production reallocation among plants under different fluctuating demands. The judgments to adjust or to do-nothing are investigated by comparing the results if the adjustment is made or not made. Results show that making adjustments benefits the manufacturers by reducing total production cost and avoiding revenue loss, which outweighs the extra costs, especially for high value-added products. Results also suggest that the manufacturer should ignore a short period abnormal state, since the benefits to respond to it might not compensate the high allocation costs. The results of this study provide a reference for the manufacturer in their decision making process of network planning with demand fluctuations, when they have to cope with benefits and costs during abnormal states.

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    Bibliographic Info

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

    Volume (Year): 132 (2011)
    Issue (Month): 1 (July)
    Pages: 131-145

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    Handle: RePEc:eee:proeco:v:132:y:2011:i:1:p:131-145

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

    Related research

    Keywords: Reliability evaluation Supply chain network design Economies of scale Demand fluctuations;

    References

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    1. Jayaraman, Vaidyanathan & Pirkul, Hasan, 2001. "Planning and coordination of production and distribution facilities for multiple commodities," European Journal of Operational Research, Elsevier, vol. 133(2), pages 394-408, January.
    2. Lai, Kee-hung & Ngai, E. W. T. & Cheng, T. C. E., 2002. "Measures for evaluating supply chain performance in transport logistics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 38(6), pages 439-456, November.
    3. GĂ©rard P. Cachon & Marshall Fisher, 2000. "Supply Chain Inventory Management and the Value of Shared Information," Management Science, INFORMS, vol. 46(8), pages 1032-1048, August.
    4. Miranda, Pablo A. & Garrido, Rodrigo A., 2004. "Incorporating inventory control decisions into a strategic distribution network design model with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(3), pages 183-207, May.
    5. Santoso, Tjendera & Ahmed, Shabbir & Goetschalckx, Marc & Shapiro, Alexander, 2005. "A stochastic programming approach for supply chain network design under uncertainty," European Journal of Operational Research, Elsevier, vol. 167(1), pages 96-115, November.
    6. Hariga, Moncer & Haouari, Mohamed, 1999. "An EOQ lot sizing model with random supplier capacity," International Journal of Production Economics, Elsevier, vol. 58(1), pages 39-47, January.
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    8. Hsu, Chaug-Ing & Li, Hui-Chieh, 2009. "An integrated plant capacity and production planning model for high-tech manufacturing firms with economies of scale," International Journal of Production Economics, Elsevier, vol. 118(2), pages 486-500, April.
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    11. Yunzeng Wang & Yigal Gerchak, 1996. "Periodic Review Production Models with Variable Capacity, Random Yield, and Uncertain Demand," Management Science, INFORMS, vol. 42(1), pages 130-137, January.
    12. Hsu, Chaug-Ing & Wen, Yuh-Horng, 2002. "Reliability evaluation for airline network design in response to fluctuation in passenger demand," Omega, Elsevier, vol. 30(3), pages 197-213, June.
    13. Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2004. "Integrated vendor-buyer cooperative models with stochastic demand in controllable lead time," International Journal of Production Economics, Elsevier, vol. 92(3), pages 255-266, December.
    14. Chen, Anthony & Yang, Hai & Lo, Hong K. & Tang, Wilson H., 2002. "Capacity reliability of a road network: an assessment methodology and numerical results," Transportation Research Part B: Methodological, Elsevier, vol. 36(3), pages 225-252, March.
    15. Srinagesh Gavirneni, 2002. "Information Flows in Capacitated Supply Chains with Fixed Ordering Costs," Management Science, INFORMS, vol. 48(5), pages 644-651, May.
    16. Cohen, Morris A. & Moon, Sangwon, 1991. "An integrated plant loading model with economies of scale and scope," European Journal of Operational Research, Elsevier, vol. 50(3), pages 266-279, February.
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    Cited by:
    1. Feng, Xuehao & Moon, Ilkyeong & Ryu, Kwangyeol, 2014. "Revenue-sharing contracts in an N-stage supply chain with reliability considerations," International Journal of Production Economics, Elsevier, vol. 147(PA), pages 20-29.
    2. Baghalian, Atefeh & Rezapour, Shabnam & Farahani, Reza Zanjirani, 2013. "Robust supply chain network design with service level against disruptions and demand uncertainties: A real-life case," European Journal of Operational Research, Elsevier, vol. 227(1), pages 199-215.

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