Coordinating a three-level supply chain with learning-based continuous improvement
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.
Year of publication: |
2010
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Authors: | Jaber, Mohamad Y. ; Bonney, Maurice ; Guiffrida, Alfred L. |
Published in: |
International Journal of Production Economics. - Elsevier, ISSN 0925-5273. - Vol. 127.2010, 1, p. 27-38
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Publisher: |
Elsevier |
Keywords: | Learning Forgetting Set-up reduction Lot-sizing Product quality Supply chain coordination Quantity discounts |
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