A stochastic bi-criterion model for supply chain optimization with stockout consideration

• Main Authors: Peñaranda, Roy Michael O., Victoriano, Sergio L., Young, Annette Phoebe G.
• Format: text
• Language: English
• Published: Animo Repository 2001
• Online Access: https://animorepository.dlsu.edu.ph/etd_honors/257
• Institution: De La Salle University

The central theme of the study is the service quality optimization of the entire supply chain system using cost and time as objective functions. The growing recognition of the twin goals of cost reduction and order lead-times reduction can pilot high service quality supply chain system. Furthermore, the emphasis of the study can be described in the words of the old cliche: 'the right product, in the right place at the right time', and was considered part of the mainstream of supply chain management. The objectives employed in the mathematical model are minimization of the total expected time from the acquisition of raw materials to the delivery of finished goods and minimization of total cost incurred in the entire system, which provides higher service quality to the entire supply chain system. More so, just by minimizing the total expected cost the system maintains order completeness and low stock level for all echelons. Also, by minimizing the two responses, the characteristic of the network to be robust to the changes in time and cost elements was achieved. Moreover, the integration of all echelons of the supply chain is also institutionalized in the model in order to capture the interdependence of all echelons. Thus, optimization of total time and total cost ensures the attainment of high service quality of not just one echelon but of the entire supply chain system. The mathematical model formulated in the study can help the system's planner decide as to how much to produce (production and shipment quantity), where to acquire the demand requirement (network assignment) and what echelons should be operated (robustness). More so, the consideration of the stochastic nature of demand gives the practical forecast value of expected stock-out and overstock. Finally, it is also captured in the study the relationship among significant variables considering total time and total cost as major responses. The impact of each variable to the objective function as well as the interaction between two variables was highlighted in the study.