A Multi-Stage Supply Chain System Controlled by Kanban

Abstract

In reasons of the new working conditions and globalization, manufacturing organizations seek to reduce their production costs. One of the factors that affect production costs is the supply chain and inventorying costs. This research presents a model of multi-stage supply chain system that operates under just-in-time (JIT) policy and supplies a fixed quantity of finished products to single customer, at a fixed time interval. Raw materials enter into the manufacturing system from two different channels. The first is brought to a consolidation centre where several items from several long-distance suppliers are collected according to single ordering policy, divided into small shipments, and redirected according to multi-ordering policy to the manufacturing system. The second type includes raw materials that are brought from JIT delivery suppliers according to the multi-ordering policy. Inbound logistics of raw materials are managed by third-party logistics (3PL) firms to coordinate and consolidate the transportation flow. The deliveries of raw material from suppliers, the work-in-process in the production stages, and the finished goods are all controlled by kanbans. For this supply chain system, the batch size and the number of batches in each stage that is to be shipped by kanbans, and the total quantity over one period are to be determined optimally. The supply chain system is modelled as a nonlinear integer programming (NLIP) problem.