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Order release strategies to control outsourced operations in a supply chain

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  • Boulaksil, Youssef
  • Fransoo, Jan C.

Abstract

We consider an original equipment manufacturer (OEM) that outsources some of its production activities to a contract manufacturer that serves several customers on the same capacitated production line. The contract manufacturer is not willing to share all relevant information with the OEM, and therefore, a complex situation arises for the OEM to control the outsourced operations properly. In this paper, we discuss and compare the performance of three different order release strategies, which differ in the number of decision levels, such that the probabilistic behaviour of the contract manufacturer is (partly) incorporated and production plans are generated based on (deterministic) mathematical programming models. Simulation results show that an order release strategy with multiple decision levels performs significantly better than an order release strategy with only one decision level. We also discuss the conditions for a successful implementation of the more advanced order release strategy. Further, some ideas for future research are presented.

Suggested Citation

  • Boulaksil, Youssef & Fransoo, Jan C., 2009. "Order release strategies to control outsourced operations in a supply chain," International Journal of Production Economics, Elsevier, vol. 119(1), pages 149-160, May.
    • Handle: RePEc:eee:proeco:v:119:y:2009:i:1:p:149-160
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    Cited by:

    1. Saghiri, Soroosh S. & Barnes, Stuart J., 2016. "Supplier flexibility and postponement implementation: An empirical analysis," International Journal of Production Economics, Elsevier, vol. 173(C), pages 170-183.
    2. Y. Boulaksil & J. C. Fransoo & T. Tan, 2017. "Capacity reservation and utilization for a manufacturer with uncertain capacity and demand," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(3), pages 689-709, July.
    3. Chen, Yuwen & Karamemis, Gulver & Zhang, Jiayuan, 2021. "A Win–Win strategy analysis for an original equipment manufacturer and a contract manufacturer in a competitive market," European Journal of Operational Research, Elsevier, vol. 293(1), pages 177-189.
    4. Boulaksil, Y. & Grunow, M. & Fransoo, J.C., 2011. "Capacity flexibility allocation in an outsourced supply chain with reservation," International Journal of Production Economics, Elsevier, vol. 129(1), pages 111-118, January.
    5. Mohammed Haoues & Mohammed Dahane & Nadia Kenza Mouss, 2019. "Outsourcing optimization in two-echelon supply chain network under integrated production-maintenance constraints," Journal of Intelligent Manufacturing, Springer, vol. 30(2), pages 701-725, February.

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