Optimization of replenishment policies for decentralized and centralized capacitated supply chains under various demands

Qinglin Duan and T. Warren Liao

International Journal of Production Economics, 2013, vol. 142, issue 1, 194-204

Abstract: In this paper, the optimal replenishment policies of capacitated supply chains (SC) operating under two different control strategies (decentralized vs. centralized) and various demands are determined and insights useful to management are discussed. The details of the system used, including the underlying supply chain inventory model and the simulation-based optimization framework, are presented. The effectiveness and efficiency of the proposed optimization framework is illustrated by comparing it with brute force estimation of the true optimum on three selected scenarios. The entire study was carried out by following a design of experiment, covering ten demand patterns, four levels of capacity constraints, and two control strategies. The main and two-factor interaction effects were analyzed via ANOVA. Detailed analyses of the ordering patterns, cost distribution over the SC and internal service level were carried out to provide useful insights. For demand with high variation, capacity constraint may lead to significant changes in ordering patterns. Failing to detect those changes may lead to unnecessary cost increase. Overall it is beneficial to adopt centralized control and cost savings realized are dependent upon the demand patterns. An incentive mechanism is proposed to coordinate the decentralized system so that each player in the SC will be better off. Additional experiments were also carried out to investigate the effect of using different allocation rules by the distributor.

Keywords: Capacitated supply chain; Hybrid meta-heuristics; Inventory optimization; Demand types; (s, S) inventory policy; Centralized control; Decentralized control (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527312004707
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:142:y:2013:i:1:p:194-204

DOI: 10.1016/j.ijpe.2012.11.004

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().