Effect of delayed differentiation on a multiproduct vendor-buyer integrated inventory system with rework

Abstract

This study explores the effect of delayed differentiation on a multiproduct vendor-buyer integrated inventory system with rework to identify its potential benefits and provide managers with in-depth information for operational decision-making. The main considerations of the proposed study include a multiproduct fabrication plan to increase machine utilization, a rework process to ensure product quality, and a multi-shipment policy to distribute the end products. In addition, these products sharing an intermediate part for which a two-stage fabrication scheme is adopted, wherein the common parts are produced at the first stage and the end products are manufactured at the second stage. The aim is to reduce the overall system costs and shorten the replenishment cycle time. Mathematical modeling and optimization methods were employed to derive the closed-form optimal replenishment cycle time and delivery decisions. We demonstrated the applicability of our research results through numerical examples and revealed that for both linear and nonlinear relationships between the common intermediate part's completion rate α and its practical value at α, our proposed two-stage production scheme with delayed differentiation is considerably beneficial vis-à-vis single-stage schemes in saving overall system costs and reducing the replenishment cycle time.

Alternative fabrication scheme to study effects of rework of nonconforming products and delayed differentiation on a multiproduct supply-chain system

“…The results from three different options can help management in better decision making. Chiu et al (2016a) used mathematical modeling to explore a single-machine two-stage multiproduct vendorbuyer integrated inventory system with rework, wherein all common parts needed for all products are fabricated in stage one, and end products are produced sequentially under a common production cycle time policy in stage two, both on a single machine. Their objective was to cut down the system cost and reduce the production cycle time as compared to what was obtained from a single stage production system.…”

“…As a result, they derived the closed-form optimal replenishment cycle time and delivery decisions and showed that their two-stage fabrication production system with delayed differentiation is considerably beneficial vis-à-vis single-stage scheme in cost saving and cycle time reduction. Chiu et al (2016c) further extended the same model of Chiu et al (2016a) with extra features on random scrap rates existence in both regular fabrication and rework processes for both common part's and end products' fabrication stages using single-machine production scheme. Prior literatures regarding different aspects of the postponement strategy used in multiproduct fabrication systems can also be found elsewhere (Gerchak and Henig, 1986;Lee, 1996;Swaminathan and Tayur, 1998;Graman and Magazine, 2002;Gupta and Benjaafar, 2004;Weber, 2008;Bernstein et al, 2011;Ferreira et al, 2015).…”

“…With the aim of further shortening replenishment cycle time, this study proposes a two-machine fabrication scheme to reexamine the problem studied by Chiu et al (2016a). With the aim of further shortening production cycle time, this study proposes an alternative two-machine production scheme to reexamine the problem studied in Chiu et al (2016a).…”

“…Traditional economic production quantity model focuses on a single-product inventory system where all products made are assumed to be perfect quality and finished products are issued continuously. To increase machine utilization, lower quality costs in production, and reflect the real-world vendor-buyer integrated systems Chiu et al (2016a) [Chiu, Y-S.P., Kuo, J-S., Chiu, S. W., Hsieh, Y-T. (2016a). Effect of delayed differentiation on a multiproduct vendor-buyer integrated inventory system with rework.…”

“…employed a single-machine two-stage production scheme to study the effects of rework and delayed differentiation on a multi-product supply-chain system. With the intention of further reducing fabrication cycle time, this study considers an alternative two-machine two-stage fabrication scheme to re-explore the problem in Chiu et al (2016a). Machine one solely produces all common parts for multiple end products.…”