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Centralized and decentralized control polices for a two-stage stochastic supply chain with subcontracting

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  • Saharidis, Georgios K.D.
  • Kouikoglou, Vassilis S.
  • Dallery, Yves

Abstract

An analysis of control policies for a two-stage supply chain with subcontractors at each stage is presented when decisions at each stage concerning safety stocks, backorders, and subcontracting are made jointly or in a decentralized manner. The inventory/admission control policies considered are base stock, echelon base stock and partial backordering, and the objective is to maximize the mean profit rate of the system. The optimal control parameters are found by exhaustive search using Markov chains. From numerical examples it appears that the policies which manage jointly sales and production levels in each stage provide much higher overall (system) profits than decentralized policies, although the latter are individually more profitable for the second stage. In addition, partial backordering provides the system with an extra profit above those that result from the lost sales (no backordering) and complete backordering policies. Finally, a number of numerical results show the impact of variations in certain system parameters on the optimal control parameters and the corresponding profit.

Suggested Citation

  • Saharidis, Georgios K.D. & Kouikoglou, Vassilis S. & Dallery, Yves, 2009. "Centralized and decentralized control polices for a two-stage stochastic supply chain with subcontracting," International Journal of Production Economics, Elsevier, vol. 117(1), pages 117-126, January.
    • Handle: RePEc:eee:proeco:v:117:y:2009:i:1:p:117-126
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    References listed on IDEAS

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    Cited by:

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    2. Kim, Eungab, 2012. "Centralized admission and production control in a two-stage supply chain with single component and customized products," International Journal of Production Economics, Elsevier, vol. 140(1), pages 530-540.
    3. Yan, Tingting & Dooley, Kevin J., 2010. "Entry timing in a secondary market: When to trade?," International Journal of Production Economics, Elsevier, vol. 124(1), pages 62-74, March.
    4. Duan, Qinglin & Warren Liao, T., 2013. "Optimization of replenishment policies for decentralized and centralized capacitated supply chains under various demands," International Journal of Production Economics, Elsevier, vol. 142(1), pages 194-204.
    5. Ma, Peng & Wang, Haiyan & Shang, Jennifer, 2013. "Supply chain channel strategies with quality and marketing effort-dependent demand," International Journal of Production Economics, Elsevier, vol. 144(2), pages 572-581.
    6. Rezapour, Shabnam & Allen, Janet K. & Mistree, Farrokh, 2016. "Reliable product-service supply chains for repairable products," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 95(C), pages 299-321.
    7. Osman, Hany & Demirli, Kudret, 2012. "Integrated safety stock optimization for multiple sourced stockpoints facing variable demand and lead time," International Journal of Production Economics, Elsevier, vol. 135(1), pages 299-307.
    8. Acar, Yavuz & Atadeniz, Sukran Nilvana, 2015. "Comparison of integrated and local planning approaches for the supply network of a globally-dispersed enterprise," International Journal of Production Economics, Elsevier, vol. 167(C), pages 204-219.
    9. Mohammed Haoues & Mohammed Dahane & Nadia Kenza Mouss, 2019. "Outsourcing optimization in two-echelon supply chain network under integrated production-maintenance constraints," Journal of Intelligent Manufacturing, Springer, vol. 30(2), pages 701-725, February.

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