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INTEGRATED SUPPLY CHAIN DESIGN MODELS: A SURVEY AND FUTURE RESEARCH DIRECTIONS
, 2007
"... Optimization models, especially nonlinear optimization models, have been widely used to solve integrated supply chain design problems. In integrated supply chain design, the decision maker needs to take into consideration inventory costs and distribution costs when the number and locations of the f ..."
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Optimization models, especially nonlinear optimization models, have been widely used to solve integrated supply chain design problems. In integrated supply chain design, the decision maker needs to take into consideration inventory costs and distribution costs when the number and locations of the facilities are determined. The objective is to minimize the total cost that includes location costs and inventory costs at the facilities, and distribution costs in the supply chain. We provide a survey of recent developments in this research area.
Supply and demand uncertainty in multiechelon supply chains
, 2006
"... This paper explores the differences between demand and supply uncertainty in multiechelon supply chains. Our central premise is that the insights gained from the study of one type of uncertainty often do not apply to the other. In fact, the two types of uncertainty are in a sense mirror images of e ..."
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Cited by 7 (0 self)
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This paper explores the differences between demand and supply uncertainty in multiechelon supply chains. Our central premise is that the insights gained from the study of one type of uncertainty often do not apply to the other. In fact, the two types of uncertainty are in a sense mirror images of each other, in that the optimal strategy for coping with supply uncertainty may be exactly opposite to that for demand uncertainty. We present several studies, each involving a fundamental question of order frequency, inventory placement, or supply chain structure. In each study, we consider a simple multiechelon supply chain, first under demand uncertainty and then under supply uncertainty in the form of disruptions. Using simulation, we demonstrate that the optimal strategy is different under the two types of uncertainty and discuss reasons for the differences. We begin with a study demonstrating that the cost of failing to plan for disruptions is greater than that of failing to plan for demand uncertainty. We conclude a with a study that demonstrates that resiliency to disruptions is often inexpensive, in that large improvements in service level can be achieved with only small increases in cost. The remaining studies identify a number of important properties of supply chains subject to disruptions that have not previously been discussed in the literature. For example, we introduce the “riskdiversification effect, ” which describes the benefit of having multiple, decentralized stocking locations under supply uncertainty. This is the opposite of the classical riskpooling effect, which describes the reverse tendency under demand uncertainty. 1 1.
A ContinuousReview Inventory Model with Disruptions at
 Both Supplier and Retailer”, Production and Operations Management
, 2009
"... We consider a continuousreview inventory problem for a retailer who faces random disruptions both internally and externally (from its supplier). We formulate the expected inventory cost at this retailer and analyze the properties of the cost function. In particular, we show that the cost function i ..."
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Cited by 7 (2 self)
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We consider a continuousreview inventory problem for a retailer who faces random disruptions both internally and externally (from its supplier). We formulate the expected inventory cost at this retailer and analyze the properties of the cost function. In particular, we show that the cost function is quasiconvex and therefore can be efficiently optimized to numerically find the optimal order size from the retailer to the supplier. Computational experiments provide additional insight into the problem. In addition, we introduce an effective approximation of the cost function. Our approximation can be solved in closed form, which is useful when the model is embedded into more complicated supply chain design or management models. Key Words: Inventory Model; Supply Disruptions
A Newsvendor Approach
, 2004
"... In today’s globally competitive environment, decision makers in supply chains are faced with numerous challenges particularly regarding the selection of suppliers. To assist in this endeavor, we examine a doublelayered supply chain where a buyer (vendor) facing the end users has the option of selec ..."
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In today’s globally competitive environment, decision makers in supply chains are faced with numerous challenges particularly regarding the selection of suppliers. To assist in this endeavor, we examine a doublelayered supply chain where a buyer (vendor) facing the end users has the option of selecting among a cohort of suppliers. The available suppliers have different yield rates and unit costs. The vendor has to decide, given the stochastic nature of the problem’s governing parameters, whether or not to order from each supplier, and if so the quantity to be ordered so as to maximize the expected profit. The newsvendor problem is extended to model the considered situation. We develop an analytical model for the problem, and propose two solution algorithms for it. Numerical studies are preformed to capture the performance nature of the developed algorithms. One of the algorithms exhibits efficient performance and utilizing it leads to many managerial insights regarding the supplier selection problem.
J_ID: z8m Customer A_ID: 050138.R2 Cadmus Art: NAV20228 — 2007/2/15 — page 1 — #1
"... Abstract: This paper focuses on the importance of decoupling recurrent supply risk and disruption risk when planning appropriate mitigation strategies. We show that bundling the two uncertainties leads a manager to underutilize a reliable source while over utilizing a cheaper but less reliable supp ..."
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Abstract: This paper focuses on the importance of decoupling recurrent supply risk and disruption risk when planning appropriate mitigation strategies. We show that bundling the two uncertainties leads a manager to underutilize a reliable source while over utilizing a cheaper but less reliable supplier. As in Dada et al. (working paper, University of Illinois, Champaign, IL, 2003), we show that increasing quantity from a cheaper but less reliable source is an effective risk mitigation strategy if most of the supply risk growth comes from an increase in recurrent uncertainty. In contrast, we show that a firm should order more from a reliable source and less from a cheaper but less reliable source if most of the supply risk growth comes from an increase in disruption probability.
©2005 INFORMS On the Value of Mix Flexibility and Dual Sourcing in Unreliable Newsvendor Networks
"... We connect the mixflexibility and dualsourcing literatures by studying unreliable supply chains that produce multiple products. We consider a firm that can invest in productdedicated resources and totally flexible resources. Product demands are uncertain at the time of resource investment, and t ..."
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We connect the mixflexibility and dualsourcing literatures by studying unreliable supply chains that produce multiple products. We consider a firm that can invest in productdedicated resources and totally flexible resources. Product demands are uncertain at the time of resource investment, and the products can differ in their contribution margins. Resource investments can fail, and the firm may choose to invest in multiple resources for a given product to mitigate such failures. In comparing a singlesource dedicated strategy with a singlesource flexible strategy, we refine the common intuition that a flexible strategy is strictly preferred to a dedicated strategy when the dedicated resources are costlier than the flexible resource. We prove that this intuition is correct if the firm is risk neutral or if the resource investments are perfectly reliable. The intuition can be wrong, however, if both of these conditions fail to hold, because there is a resourceaggregation disadvantage to the flexible strategy that can dominate the demand pooling and contributionmargin benefits of the flexible strategy when resource investments are unreliable and the firm is risk averse. We investigate the influence that resource attributes, firm attributes, and productportfolio attributes have on the attractiveness of various supplychain structures that differ in their levels of mix flexibility and diversification, and we investigate the influence these attributes have on the optimal resource investments within a given supplychain structure. Our results indicate that the appropriate levels of diversification and flexibility are very