Supply coordinated decision-making

Hall and Potts (2000) study scheduling problems with batch delivery in an arborescent supply chain where a supplier makes deliveries to several manufacturers, who also make deliveries to customers. Various problems from a supplier point of view, from a manufacturer point of view, or from an entire system point of view are considered. Each problem is either proved to be NP-hard or given a polynomial dynamic programming algorithm. They also discuss the possible benefits from coordinated decision making, as well as some mechanisms for achieving it. 

Coordination of decision making along links in the supply chain... 

In supply chain management (SCM), linkages play the roles of eon-ductor and sheet music. The SCOR model from the Supply-Chain Couneil is an example of one method for coordinating the supply chain. Another example, in the Toyota Production System, is the kanban system that signals the need for more parts. Proactive systems deseribed in Chapter 30 that use business rules to automate decision making are another example. The decision to use any particular technique at a point in time is an important supply chain design feature. 

Seifert, et al. (2001) also show that decentralized decision making in the cooperative supply chain can be coordinated through use of an ending-inventory subsidy of b and a transfer payment t for each unit that the retailer ships (at cost) to the virtual store in response to actual demand, both paid by the manufacturer to the retailer. 

ALIGNING INCENTIVES ACROSS FUNCTIONS One key to coordinated decisions within a firm is to ensure that the objective any function uses to evaluate a decision is aligned with the firm s overall objective. All facility, transportation, and inventory decisions should be evaluated based on their effect on profitability or total costs, not functional costs. This helps prevent situations such as a transportation manager making decisions that lower transportation cost but increase overall supply chain costs (see Chapter 14). 

COORDINATION TO INCREASE TOTAL SUPPLY CHAIN PROFITS A supply chain is coordinated if the decisions the retailer and supplier make maximize total supply chain profits. In reality, each stage in a supply chain may have a separate owner and thus attempt to maximize its own profits. For example, each stage of a supply chain is likely to make lot-sizing decisions with an objective of minimizing its own overall costs. The result of this independent decision making can be a lack of coordination in a supply chain because actions that maximize retailer profits may not maximize supply chain profits. In this section, we discuss how a manufacturer may use appropriate quantity discounts to ensure that total supply chain profits are maximized even if the retailer is acting to maximize its own profits. 

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