Impact of supplier's lead time and forecast demand updating on retailer's order quantity variability in a two-level supply chain

Motivated by the dramatic boom-and-bust cycles in semiconductor industry, we use an analytical model to analyze two important factors that can contribute to the high degree of order quantity variability experienced by semiconductor manufacturers: supplier's lead time and forecast demand updatin...

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Bibliographic Details
Published inInternational journal of production economics Vol. 86; no. 2; pp. 169 - 179
Main Authors So, Kut C., Zheng, Xiaona
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 11.11.2003
Elsevier
Elsevier Sequoia S.A
SeriesInternational Journal of Production Economics
Subjects
Demand
Demand fluctuations
Industrial economics
Inventory management
Lead time
Mathematical models
Order quantity
Semiconductors
Studies
Suppliers
Supply chain management
Supply chains
Lead time
Inventory management
Demand fluctuations
Supply chain management
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Summary:Motivated by the dramatic boom-and-bust cycles in semiconductor industry, we use an analytical model to analyze two important factors that can contribute to the high degree of order quantity variability experienced by semiconductor manufacturers: supplier's lead time and forecast demand updating. Specifically, we use a two-level supply chain model to study how the supplier's variable delivery lead times and the correlation of the external demands can amplify the variability of the order quantities of the downstream member in the supply chain. Based on our analytical and numerical results, some useful insights are used for managing supplier's lead time performance in order to reduce order quantity variability in a supply chain. For instance, our results suggest that in allocating scarce capacity by the supplier, higher priority should be given to those products whose demands are highly variable and correlated for maintaining consistent delivery lead times for these products.
ISSN:0925-5273
1873-7579
DOI:10.1016/S0925-5273(03)00050-1