Capacity pooling, benefits

The earlier section showed that pooling capacity can benefit the supply chain. But there are cases where splitting capacity may improve the system. To illustrate this issue, consider a supply chain where orders have different service requirements. When such orders share a location, a setup time or change-over time is introduced in order for the location to acxommodate the requirements of disparate customers. 

Thus, even though the benefits of pooling capacity have been sacrificed, the supply chain benefits from the increased productivity of the specialized capacity. Therefore, even though capacity pooling increases potential access to capacity, the associated mix of tasks to be done at pooled locations may affect the supply of capacity available and thus worsen system performance. In other words, capacity configurations have to balance the benefits of pooling with the benefits of splitting capacity. 

ETBE is a valuable component for gasoline, with properties similar to, and in some cases better than, MTBE (Table 11.1). ETBE has, in fact, the same blending characteristics as MTBE but it has the additional benefits of a lower solubility in water, a lower volatility (some additional light compounds can be introduced in the gasoline pool without affecting its RVP) and moreover it allows a higher plant production capacity (16% wt). 

If each individual retailer carried its own inventory, it would maintain an inventory level of Lfi + (Zct-JL). Thus the total system inventory would be n LfX, + (Zct-JL)). The pooled inventory includes a safety stock of Z(Jy/nL while the individual locations would generate a safety stock of Z(7n-jL. Thus, the role of the warehouse in a distribution supply chain is to decrease the buffer capacity by a factor of Jn. This - fn effect is a rule of thumb to estimate the benefit of consolidating inventory in a supply chain. 

Thus, as long as the pooled order stream can be served by any location, at the same rate, lead time is deo-eased by about 50% with the same capacity. This is the benefit of pooling capacity in a supply chain. But how did the same capacity, deployed differently, have such a significant impact on performanc e Notic e that in a pooled capacity system, any available unit of capacity can be used to satisfy a waiting order. This flexibility to use a larger pool of capacity at any time prevents queues, improving the performance of the supply chain. 

Operational goals of forming coalition include cost savings through shared resources and economies of scale, risk pooling, and improved capacity utilization. Granot and Sosic (2005) study the benefits of coalitions and explore conditions under which the formation of alliances is optimal. They also provide insights on the stability of these coahtions. However, the dynamics of such coalitions are not very well understood (Cattani et al. 2004) in terms of their stability. 

---