IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v10y2022i7p1142-d785923.html
   My bibliography  Save this article

Mathematical Modelling of Inventory and Process Outsourcing for Optimization of Supply Chain Management

Author

Listed:
  • Mohammed Alkahtani

    (Industrial Engineering Department, College of Engineering, King Saud University, Riyadh 11421, Saudi Arabia)

Abstract

Outsourcing is one of the major challenges for production firms in the current supply chain management (SCM) due to limited skilled workers and technology resources. There are too many parameters involved in the strategic decisions of the outsourcing level, quantity, quality, and cost. The outsourcing process removes the burden of capital investment; however, still it creates crucial concerns related to inventory control and production management by adding extra inventories. The semi-finished products are outsourced for a few processes due to limited resources and then returned to the manufacturer for the finishing operations. The article is based on the mathematical modeling and optimization of the process outsourcing considering imperfect production with variable quantity for the effective supply chain management. The numerical experiment was performed based on the data taken from the industry for the application of the proposed outsourcing-based SCM model. The results are significant in finding optimal production and outsourcing quantity with a minimum total cost of SCM. The sensitivity analysis was performed to see how important the effect of input parameters is on the total cost. The research is an important contribution in developing a mathematical model of process outsourcing in SCM. The research study is beneficial for managers to find the economic feasibility of process outsourcing for managing inventory and supply chain between manufacturer and outsourcing vendor.

Suggested Citation

  • Mohammed Alkahtani, 2022. "Mathematical Modelling of Inventory and Process Outsourcing for Optimization of Supply Chain Management," Mathematics, MDPI, vol. 10(7), pages 1-27, April.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:7:p:1142-:d:785923
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/10/7/1142/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/10/7/1142/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    2. Li, Xiang & Li, Yongjian & Cai, Xiaoqiang, 2013. "Double marginalization and coordination in the supply chain with uncertain supply," European Journal of Operational Research, Elsevier, vol. 226(2), pages 228-236.
    3. Huang, Min & Tu, Jun & Chao, Xiuli & Jin, Delong, 2019. "Quality risk in logistics outsourcing: A fourth party logistics perspective," European Journal of Operational Research, Elsevier, vol. 276(3), pages 855-879.
    4. Colin Scott & Henriette Lundgren & Paul Thompson, 2018. "Guide to Supply Chain Management," Management for Professionals, Springer, edition 2, number 978-3-319-77185-4, December.
    5. Alvarez, Luis H.R. & Stenbacka, Rune, 2007. "Partial outsourcing: A real options perspective," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 91-102, February.
    6. Amid, Amin & Ghodsypour, S.H. & O'Brien, Christopher, 2009. "A weighted additive fuzzy multiobjective model for the supplier selection problem under price breaks in a supply Chain," International Journal of Production Economics, Elsevier, vol. 121(2), pages 323-332, October.
    7. William Ho & Tian Zheng & Hakan Yildiz & Srinivas Talluri, 2015. "Supply chain risk management: a literature review," International Journal of Production Research, Taylor & Francis Journals, vol. 53(16), pages 5031-5069, August.
    8. Ding, Huiping & Chen, Xiangbo & Lin, Kuanhai & Wei, Yunbing, 2019. "Collaborative mechanism of project profit allotment in petroleum engineering service chain with customized integration," International Journal of Production Economics, Elsevier, vol. 214(C), pages 163-174.
    9. Chen, Kebing & Xiao, Tiaojun, 2015. "Outsourcing strategy and production disruption of supply chain with demand and capacity allocation uncertainties," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 243-257.
    10. Widyadana, Gede Agus & Wee, Hui Ming, 2012. "An economic production quantity model for deteriorating items with multiple production setups and rework," International Journal of Production Economics, Elsevier, vol. 138(1), pages 62-67.
    11. Inderfurth, Karl & Kelle, Peter, 2011. "Capacity reservation under spot market price uncertainty," International Journal of Production Economics, Elsevier, vol. 133(1), pages 272-279, September.
    12. Wu, Junjian & Wang, Haiyan & Shang, Jennifer, 2019. "Multi-sourcing and information sharing under competition and supply uncertainty," European Journal of Operational Research, Elsevier, vol. 278(2), pages 658-671.
    13. Alexandre Dolgui & Dmitry Ivanov & Boris Sokolov, 2018. "Ripple effect in the supply chain: an analysis and recent literature," International Journal of Production Research, Taylor & Francis Journals, vol. 56(1-2), pages 414-430, January.
    14. Gurnani, Haresh & Gerchak, Yigal, 2007. "Coordination in decentralized assembly systems with uncertain component yields," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1559-1576, February.
    15. Xin Yao & Ruting Huang & Malin Song & Nishikant Mishra, 2018. "Pre-positioning inventory and service outsourcing of relief material supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 56(21), pages 6859-6871, November.
    16. Spinler, Stefan & Huchzermeier, Arnd, 2006. "The valuation of options on capacity with cost and demand uncertainty," European Journal of Operational Research, Elsevier, vol. 171(3), pages 915-934, June.
    17. Tsan-Ming Choi & T. C. E. Cheng & Xiande Zhao & Xiang Li & Yongjian Li & Xiaoqiang Cai & Jun Shan, 2016. "Service Channel Choice for Supply Chain: Who is Better Off by Undertaking the Service?," Production and Operations Management, Production and Operations Management Society, vol. 25(3), pages 516-534, March.
    18. Jaber, Mohamad Y. & Zanoni, Simone & Zavanella, Lucio E., 2014. "Economic order quantity models for imperfect items with buy and repair options," International Journal of Production Economics, Elsevier, vol. 155(C), pages 126-131.
    19. Zugang Liu & Anna Nagurney, 2013. "Supply chain networks with global outsourcing and quick-response production under demand and cost uncertainty," Annals of Operations Research, Springer, vol. 208(1), pages 251-289, September.
    20. Nookabadi, Ali Shahandeh, 2016. "Outsource planning through option contracts with demand and cost uncertaintyAuthor-Name: Nosoohi, Iman," European Journal of Operational Research, Elsevier, vol. 250(1), pages 131-142.
    21. Benaroch, Michel & Webster, Scott & Kazaz, Burak, 2012. "Impact of sourcing flexibility on the outsourcing of services under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 219(2), pages 272-283.
    22. Zhang, Shichen & Zhang, Jianxiong & Zhu, Guowei, 2019. "Retail service investing: An anti-encroachment strategy in a retailer-led supply chain," Omega, Elsevier, vol. 84(C), pages 212-231.
    23. Mustafa Akan & Bar{i}c{s} Ata & Martin A. Lariviere, 2011. "Asymmetric Information and Economies of Scale in Service Contracting," Manufacturing & Service Operations Management, INFORMS, vol. 13(1), pages 58-72, September.
    24. Colin Scott & Henriette Lundgren & Paul Thompson, 2018. "Guide to Outsourcing in Supply Chain Management," Management for Professionals, in: Guide to Supply Chain Management, edition 2, chapter 11, pages 189-202, Springer.
    25. Tsan-Ming Choi & Stein W Wallace & Yulan Wang, 2016. "Risk management and coordination in service supply chains: information, logistics and outsourcing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 159-164, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zsolt Tibor Kosztyán & Zoltán Kovács, 2023. "Preface to the Special Issue on “Mathematical Methods and Operation Research in Logistics, Project Planning, and Scheduling”," Mathematics, MDPI, vol. 11(1), pages 1-3, January.
    2. Firmansyah Firmansyah & Herman Mawengkang & Abdul Mujib & Devy Mathelinea, 2022. "A Decision Model to Plan Optimally Production-Distribution of Seafood Product with Multiple Locations," Mathematics, MDPI, vol. 10(18), pages 1-13, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lou, Yaqi & Feng, Lipan & He, Shuguang & He, Zhen & Zhao, Xiukun, 2020. "Logistics service outsourcing choices in a retailer-led supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    2. Heydari, Jafar & Govindan, Kannan & Ebrahimi Nasab, Hamid Reza & Taleizadeh, Ata Allah, 2020. "Coordination by quantity flexibility contract in a two-echelon supply chain system: Effect of outsourcing decisions," International Journal of Production Economics, Elsevier, vol. 225(C).
    3. Nookabadi, Ali Shahandeh, 2016. "Outsource planning through option contracts with demand and cost uncertaintyAuthor-Name: Nosoohi, Iman," European Journal of Operational Research, Elsevier, vol. 250(1), pages 131-142.
    4. Mahadevan, B. & Hazra, Jishnu & Jain, Tarun, 2017. "Services outsourcing under asymmetric cost information," European Journal of Operational Research, Elsevier, vol. 257(2), pages 456-467.
    5. Awasthy, Prakash & Hazra, Jishnu, 2020. "Collaboration under outcome-based contracts for information technology services," European Journal of Operational Research, Elsevier, vol. 286(1), pages 350-359.
    6. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.
    7. Lijo John & Anand Gurumurthy & Arqum Mateen & Gopalakrishnan Narayanamurthy, 2022. "Improving the coordination in the humanitarian supply chain: exploring the role of options contract," Annals of Operations Research, Springer, vol. 319(1), pages 15-40, December.
    8. Wang, Di & Liu, Weihua & Shen, Xinran & Wei, Wanying, 2019. "Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 293-311.
    9. Gao, Yongling & Driouchi, Tarik, 2018. "Accounting for ambiguity and trust in partial outsourcing: A behavioral real options perspective," Journal of Business Research, Elsevier, vol. 92(C), pages 93-104.
    10. Peng Xing & Xiangru Zhao & Mingxing Wang, 2022. "The Optimal Combination between Recycling Channel and Logistics Service Outsourcing in a Closed-Loop Supply Chain Considering Consumers’ Environmental Awareness," Sustainability, MDPI, vol. 14(24), pages 1-25, December.
    11. Dmitry Ivanov, 2022. "Viable supply chain model: integrating agility, resilience and sustainability perspectives—lessons from and thinking beyond the COVID-19 pandemic," Annals of Operations Research, Springer, vol. 319(1), pages 1411-1431, December.
    12. Antonio Zavala-Alcívar & María-José Verdecho & Juan-José Alfaro-Saiz, 2020. "A Conceptual Framework to Manage Resilience and Increase Sustainability in the Supply Chain," Sustainability, MDPI, vol. 12(16), pages 1-38, August.
    13. Shen, Bin & Xu, Xiaoyan & Guo, Shu, 2019. "The impacts of logistics services on short life cycle products in a global supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 153-167.
    14. Renbang Shan & Li Luo & Baoli Shi, 2023. "The choice of recycling strategies for decision-makers based on government subsidy and service budget," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(2), pages 1441-1472, February.
    15. Jaya Priyadarshini & Rajesh Kr Singh & Ruchi Mishra & Surajit Bag, 2022. "Investigating the interaction of factors for implementing additive manufacturing to build an antifragile supply chain: TISM-MICMAC approach," Operations Management Research, Springer, vol. 15(1), pages 567-588, June.
    16. H. Neil Geismar & Yiwei Huang & Suresh D. Pillai & Chelliah Sriskandarajah & Seokjun Youn, 2020. "Location‐Routing with Conflicting Objectives: Coordinating eBeam Phytosanitary Treatment and Distribution of Mexican Import Commodities," Production and Operations Management, Production and Operations Management Society, vol. 29(6), pages 1506-1531, June.
    17. Wei Xu & Dong-Ping Song, 2022. "Integrated optimisation for production capacity, raw material ordering and production planning under time and quantity uncertainties based on two case studies," Operational Research, Springer, vol. 22(3), pages 2343-2371, July.
    18. Jiarong Luo & Xu Chen & Chong Wang & Gaoxun Zhang, 2021. "Bidirectional options in random yield supply chains with demand and spot price uncertainty," Annals of Operations Research, Springer, vol. 302(1), pages 211-230, July.
    19. Xiaowei Zhu, 2017. "Outsourcing management under various demand Information Sharing scenarios," Annals of Operations Research, Springer, vol. 257(1), pages 449-467, October.
    20. Di Corato, Luca & Moretto, Michele & Rossini, Gianpaolo, 2017. "Financing flexibility: The case of outsourcing," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 35-65.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:10:y:2022:i:7:p:1142-:d:785923. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.