Information Flows in Capacitated Supply Chains with Fixed Ordering Costs
Many organizations have only recently recognized that sharing information with other members in their supply chain can lead to signficant reduction in the total costs.Usually these information flows are incorporated into existing operating policies at the various parties.In this paper we argue that, in some cases, it may be necessary to change the way the supply chain is managed to make complete use of the information flows. We support this argument by analyzing a supply chain containing a capacitated supplier and a retailer facing i.i.d. demands. In addition there are fixed ordering costs between the retailer and the supplier.In this setting, we consider two models: (1) the retailer is using the optimal (s,S) policy and providing the supplier information about her inventory levels; and (2) the retailer, still sharing information on her inventory levels, orders in a period only if by the previous period the cumulative end-customer demand since she last ordered was greater than \delta . Thus, in Model 1, information sharing is used to supplement existing policies; while, in Model 2, we have redefined operating policies to make better use of the information flows. We will show, via a detailed computational study, that the total supply chain costs of Model 2 are 10.4% lower, on the average, than that of Model 1. We noticed that this reduction in costs is higher at higher capacities, higher supplier penalty costs, lower retailer penalty costs, moderate values of set-up cost, and at lower end-customer demand variances.
Volume (Year): 48 (2002)
Issue (Month): 5 (May)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:48:y:2002:i:5:p:644-651. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.