Centralized and decentralized control polices for a two-stage stochastic supply chain with subcontracting

An analysis of control policies for a two-stage supply chain with subcontractors at each stage is presented when decisions at each stage concerning safety stocks, backorders, and subcontracting are made jointly or in a decentralized manner. The inventory/admission control policies considered are bas...

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Bibliographic Details
Published inInternational journal of production economics Vol. 117; no. 1; pp. 117 - 126
Main Authors Saharidis, Georgios K.D., Kouikoglou, Vassilis S., Dallery, Yves
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 2009
Elsevier
Elsevier Sequoia S.A
SeriesInternational Journal of Production Economics
Subjects
Admission control
Centralized–decentralized control
Decentralization
Inventory management
Markov analysis
Markov chains
Production control
Profit maximization
Stochastic models
Studies
Supply chains
Supply chains Production control Admission control Centralized-decentralized control Markov chains
Markov chains
Supply chains
Admission control
Centralized–decentralized control
Production control
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Summary:An analysis of control policies for a two-stage supply chain with subcontractors at each stage is presented when decisions at each stage concerning safety stocks, backorders, and subcontracting are made jointly or in a decentralized manner. The inventory/admission control policies considered are base stock, echelon base stock and partial backordering, and the objective is to maximize the mean profit rate of the system. The optimal control parameters are found by exhaustive search using Markov chains. From numerical examples it appears that the policies which manage jointly sales and production levels in each stage provide much higher overall (system) profits than decentralized policies, although the latter are individually more profitable for the second stage. In addition, partial backordering provides the system with an extra profit above those that result from the lost sales (no backordering) and complete backordering policies. Finally, a number of numerical results show the impact of variations in certain system parameters on the optimal control parameters and the corresponding profit.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2008.10.001