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Optimal feedback production for a two-level supply chain

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  • Chan, Chi Kin
  • Lee, H.W.J.
  • Wong, K.H.

Abstract

The dynamics of a supply chain has been modelled by several authors, yet very few attempts have been made to find the vendor's optimal production policy when facing such dynamics. In this paper, we consider a two-level supply chain. We first model the dynamics of the retailer's problem as an infinite-horizon time-delayed control problem. By approximating the time interval [0,[infinity]) by [0,Tf], we obtain an approximated problem (P(Tf)) for the retailer, which can be solved easily by the control parametrization. Next, we extend this model to solving the manufacturer's problem. By assuming that the manufacturer has full knowledge of his demand throughout the time interval [0,Tf], which is equal to the retailer's optimal production rate in this time interval, he can solve his approximated problem to find his optimal production rate throughout [0,Tf]. Several examples have been solved to illustrate the efficiency of the method.

Suggested Citation

  • Chan, Chi Kin & Lee, H.W.J. & Wong, K.H., 2008. "Optimal feedback production for a two-level supply chain," International Journal of Production Economics, Elsevier, vol. 113(2), pages 619-625, June.
    • Handle: RePEc:eee:proeco:v:113:y:2008:i:2:p:619-625
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    References listed on IDEAS

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    1. John D. Sterman, 1987. "Testing Behavioral Simulation Models by Direct Experiment," Management Science, INFORMS, vol. 33(12), pages 1572-1592, December.
    2. Hafeez, K. & Griffiths, M. & Griffiths, J. & Naim, M. M., 1996. "Systems design of a two-echelon steel industry supply chain," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 121-130, August.
    3. Wikner, J. & Towill, D. R. & Naim, M., 1991. "Smoothing supply chain dynamics," International Journal of Production Economics, Elsevier, vol. 22(3), pages 231-248, December.
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    Cited by:

    1. Tianjian Yang & Weiguo Fan, 2016. "Information management strategies and supply chain performance under demand disruptions," International Journal of Production Research, Taylor & Francis Journals, vol. 54(1), pages 8-27, January.
    2. Hill, Alex & Doran, Des & Stratton, Roy, 2012. "How should you stabilise your supply chains?," International Journal of Production Economics, Elsevier, vol. 135(2), pages 870-881.

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