Title: A simulation study on strategy to mitigate leadtime uncertainty risk in the context of information sharing

Authors: P. Padmapriya; Arshinder Kaur

Addresses: Department of Management Studies, Indian Institute of Technology, Madras, Chennai-36, India. ' Department of Management Studies, Indian Institute of Technology, Madras, Chennai-36, India

Abstract: Lead time is an inseparable factor of any supply chain. Lead time uncertainty is known as one of the types of supply side risks or uncertainty that affects ordering policies, inventory levels and cost, and product availability level. Information sharing between supply chain members provides opportunities to reduce the inventory levels held to face such uncertainty thereby improving the performance of the supply chain. In this context, we study the effect of sharing the information regarding replenishment leadtime on total inventory costs in a two-level supply chain. In this paper, we have proposed two-level supply chain model to analyse the effects of leadtime information and to quantify the value of the information about lead-times to the retailer. We assume that the replenishment leadtime of the supplier is random and following uniform distribution and we consider two replenishment policies the first one for the case without information sharing and the second one with information sharing. With information sharing in place the retailer exercises the strategy of employing an emergency supplier to mitigate the leadtime uncertainty. The system under consideration is formulated as a mixed integer linear programming (MILP) problem and the simulation exercise results indicate that the value of leadtime information can be significant.

Keywords: SCM; supply chain management; supply risk; leadtime uncertainty; information sharing; risk mitigation; mixed integer linear programming; MILP; simulation studies; lead times; supply side risks; ordering policies; inventory levels; inventory costs; product availability; availability levels; supply chain members; inventories; replenishment leadtime; two-level supply chains; retailers; uniform distribution; replenishment policies; emergency suppliers; logistics systems; logistics management.

DOI: 10.1504/IJLSM.2012.050159

International Journal of Logistics Systems and Management, 2012 Vol.13 No.4, pp.483 - 508

Published online: 10 Dec 2014 *

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