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Coordination of production and ordering policies under capacity disruption and product write-off risk: an analytical study with real-data based simulations of a fast moving consumer goods company

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  • Dmitry Ivanov

    (Berlin School of Economics and Law)

  • Maxim Rozhkov

    (X5 Retail Group)

Abstract

Performance impacts of ordering and production control policies in the presence of capacity disruptions are studied on the real-life example of a retail supply chain with product perishability considerations. Constraints on product perishability typically result in reductions in safety stock and increases in transportation frequency. Consideration of the production capacity disruption risks may lead to safety stock increases. This trade-off is approached with the help of a simulation model that is used to compare supply chain performance impacts with regard to coordinated and non-coordinated ordering and production control policies. Real data of a fast moving consumer goods company is used to perform simulations and to derive novel managerial insights and practical recommendations on inventory, on-time delivery and service level control. In particular, for the first time, the effect of ‘postponed redundancy’ has been observed. Moreover, a coordinated production–ordering contingency policy in the supply chain within and after the disruption period has been developed and tested to reduce the negative impacts of the ‘postponed redundancy’. The lessons learned from experiments provide evidence that a coordinated policy is advantageous for inventory dynamics stabilization, improvement in on-time delivery, and variation reduction in customer service level.

Suggested Citation

  • Dmitry Ivanov & Maxim Rozhkov, 2020. "Coordination of production and ordering policies under capacity disruption and product write-off risk: an analytical study with real-data based simulations of a fast moving consumer goods company," Annals of Operations Research, Springer, vol. 291(1), pages 387-407, August.
  • Handle: RePEc:spr:annopr:v:291:y:2020:i:1:d:10.1007_s10479-017-2643-8
    DOI: 10.1007/s10479-017-2643-8
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    2. Giorgia Sammarco & Daniel Ruzza & Behzad Maleki Vishkaei & Pietro De Giovanni, 2022. "The Impact of Digital Technologies on Company Restoration Time Following the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(22), pages 1-17, November.
    3. Ana Esteso & M. M. E. Alemany & Fernando Ottati & Ángel Ortiz, 2023. "System dynamics model for improving the robustness of a fresh agri-food supply chain to disruptions," Operational Research, Springer, vol. 23(2), pages 1-53, June.
    4. Ivanov, Dmitry & Dolgui, Alexandre, 2021. "OR-methods for coping with the ripple effect in supply chains during COVID-19 pandemic: Managerial insights and research implications," International Journal of Production Economics, Elsevier, vol. 232(C).
    5. Burgos, Diana & Ivanov, Dmitry, 2021. "Food retail supply chain resilience and the COVID-19 pandemic: A digital twin-based impact analysis and improvement directions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    6. 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.
    7. Rozhkov, Maxim & Ivanov, Dmitry & Blackhurst, Jennifer & Nair, Anand, 2022. "Adapting supply chain operations in anticipation of and during the COVID-19 pandemic," Omega, Elsevier, vol. 110(C).
    8. Aldrighetti, Riccardo & Battini, Daria & Ivanov, Dmitry & Zennaro, Ilenia, 2021. "Costs of resilience and disruptions in supply chain network design models: A review and future research directions," International Journal of Production Economics, Elsevier, vol. 235(C).

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