Benefits of co-operation in a production distribution environment |
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Authors: | Srinagesh Gavirneni |
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Institution: | Austin Product Center – Research, Schlumberger, 8311 North FM 620, Austin, TX 78726, USA |
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Abstract: | We model co-operation in a typical production distribution setting that contains one capacitated supplier producing and distributing a single product to many identical retailers who are facing i.i.d. end-item demands from the consumers. We consider three inventory allocation mechanisms, representing varying degrees of co-operation, at the supplier: (1) the orders from the retailers are filled in a predetermined sequence; (2) the orders from the retailers are filled after taking into account their current inventories; and (3) the orders from the retailers are filled assuming that the product can also be shipped from one retailer to another. We estimate the benefits due to co-operation in this supply chain and study the effect of various system parameters on these benefits. An extensive computational study indicated that the benefits of co-operation in this production distribution environment decrease with increase in the supplier capacity, increase in the number of retailers, decrease in penalty cost, and decrease in consumer demand variance. |
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Keywords: | Supply chain management Information sharing Inventory control |
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