Coordinating a three-level supply chain with learning-based continuous improvement

Mohamad Y. Jaber, Maurice Bonney and Alfred L. Guiffrida

International Journal of Production Economics, 2010, vol. 127, issue 1, 27-38

Abstract: Learning curve theory has been widely used as a managerial tool to describe and model product and process improvement. This paper investigates a three-level supply chain (supplier-manufacturer-retailer) where the manufacturing operations undergo a learning-based continuous improvement process. Improvements in the manufacturer's operation are characterized by enhanced capacity utilization, reductions in set-ups times, and improved product quality through the elimination of rework. As a result of these continuous improvements, the manufacturer can justify a production policy that is based on more frequent, smaller lot size production. For this production policy to be practical and not sub-optimal to the supply chain, the manufacturer must integrate its lot-sizing models with the replenishment policies of its upstream raw material suppliers and the demand requirements of its downstream customers (retailers). Mathematical models that achieve chain-wide lot-sizing integration are developed and solution procedures for the models are illustrated by numerical examples. The results demonstrate that learning-based improvements in set-up time and rework allow retailers to order in progressively smaller lot sizes as the manufacturer offers larger discounts and profits and that the entire supply chain benefits from implementing learning-based continuous quality improvements. The results also demonstrate that forgetting effects lead to increases in supply chain costs.

Keywords: Learning; Forgetting; Set-up; reduction; Lot-sizing; Product; quality; Supply; chain; coordination; Quantity; discounts (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:127:y:2010:i:1:p:27-38

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