Tactic of Supply Chain Coordination when the Freight Cost of Unit Product is Sensitive to Lot Size

Hua Ming Gui

doi:10.4028/www.scientific.net/AMR.601.593

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Tactic of Supply Chain Coordination when the Freight Cost of Unit Product is Sensitive to Lot Size

Abstract:

Considering a supply chain with a manufacturer and a wholesaler, we assume the freight cost of unit product is sensitive to lot size and the manufacturer is responsible for product delivery, the optimal lot size models under decentralized decision and centralized supply chain are presented. The analytical result shows that the more flexible the delivery capacity is, the smaller the optimal production size is, which is consistent with short order lead time and small lot size that claimed by the wholesaler. Therefore, the manufacturer can quickly respond to demand of the wholesaler under the condition that the total cost is invariable. Moreover, when the delivery capacity isn’t absolute flexibility, the manufacturer may motivate the wholesaler to undertake product delivery through reducing the transfer price so that the wholesaler’s optimal order size under decentralized supply chain is closer to both the manufacturer’s optimal production size and the entire supply chain’s optimal size under centralized supply chain, which may benefit the entire supply chain since both can obtain a win-win solution.

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Periodical:

Advanced Materials Research (Volume 601)

Pages:

593-598

DOI:

https://doi.org/10.4028/www.scientific.net/AMR.601.593

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Online since:

December 2012

Authors:

Hua Ming Gui

Keywords:

Flexibility of Delivery Capacity, Lot Size Models, Pareto Optimization, Supply Chain

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