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Collaborative Policy of the Supply-Hub for Assemble-to-Order Systems with Delivery Uncertainty

Author

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  • Guo Li
  • Mengqi Liu
  • Xu Guan
  • Zheng Huang

Abstract

This paper considers the collaborative mechanisms of the Supply-Hub in the Assemble-to-Order system (ATO system hereafter) with upstream delivery uncertainty. We first propose a collaborative replenishment mechanism in the ATO system, and construct a replenishment model with delivery uncertainty in use of the Supply-Hub. After transforming the original model into a one-dimensional optimization problem, we derive the optimal assembly quantity and reorder point of each component. In order to enable the Supply-Hub to conduct collaborative replenishment with each supplier, the punishment and reward mechanisms are proposed. The numerical analysis illustrates that service level of the Supply-Hub is an increasing function of both punishment and reward factors. Therefore, by adjusting the two factors, suppliers’ incentives of collaborative replenishment can be significantly enhanced, and then the service level of whole ATO system can be improved.

Suggested Citation

  • Guo Li & Mengqi Liu & Xu Guan & Zheng Huang, 2014. "Collaborative Policy of the Supply-Hub for Assemble-to-Order Systems with Delivery Uncertainty," Discrete Dynamics in Nature and Society, Hindawi, vol. 2014, pages 1-10, May.
    • Handle: RePEc:hin:jnddns:625812
    DOI: 10.1155/2014/625812
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