Evaluating Supply Chain Flexibility with Order Quantity Constraints and Lost Sales

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dc.contributor.authorKesen, Saadettin Erhan
dc.contributor.authorKanchanapiboon, Atipol
dc.contributor.authorDas, Sanchoy K.
dc.date.accessioned2020-03-26T17:48:30Z
dc.date.available2020-03-26T17:48:30Z
dc.date.issued2010
dc.departmentSelçuk Üniversitesien_US
dc.description.abstractIn a flexible supply chain buyers and suppliers are willing to accommodate the uncertainties and variations in each other's businesses. In many instances the buyer may prefer to use supply flexibility, as opposed to an inventory holding strategy, to counter demand uncertainty. We consider the case where the buyer releases a fixed period replenishment order to the supplier under a supply contract defined by three parameters: (i) supply price per unit (ii) minimum order quantity and (iii) order quantity reduction penalty. Following a demand drop the buyer therefore has two flexibility options in the order cycle: (i) to place an order less than the supplier specified minimum order quantity and pay the associated penalty, or (ii) place no order and lose the sales for the current period. There is no penalty for not placing an order. A key buyer decision then is Q(lost), the order or replenishment quantity level below which no order is placed and the sales are lost. A model for deriving the expected supply and lost sales cost as a function of Q(lost) is presented, and it is shown that the optimal value of Q(lost) is the inflexion point of the lost sales cost and the quantity penalty. The model is then used to select the supplier that minimizes the procurement plus lost sales costs from a given set of supply bids and a known expected customer demand behavior. Finally, the buyer also has the option to make capital investments in the supplier so as to reduce the minimum order quantity and hence reduce the projected supply costs. We evaluate the economics of this tactic.en_US
dc.description.sponsorshipScientific and Technological Research Council of Turkey (TUBITAK)Turkiye Bilimsel ve Teknolojik Arastirma Kurumu (TUBITAK)en_US
dc.description.sponsorshipThis research is partly supported by a grant from The Scientific and Technological Research Council of Turkey (TUBITAK).en_US
dc.identifier.citationKesen, S. E., Kanchanapiboon, A., Das, S. K., (2010). Evaluating Supply Chain Flexibility with Order Quantity Constraints and Lost Sales. International Journal of Production Economics, (126), 181-188. Doi: 10.1016/j.ijpe.2010.03.006
dc.identifier.doi10.1016/j.ijpe.2010.03.006en_US
dc.identifier.endpage188en_US
dc.identifier.issn0925-5273en_US
dc.identifier.issn1873-7579en_US
dc.identifier.scopusqualityQ1en_US
dc.identifier.startpage181en_US
dc.identifier.urihttps://dx.doi.org/10.1016/j.ijpe.2010.03.006
dc.identifier.urihttps://hdl.handle.net/20.500.12395/24895
dc.identifier.volume126en_US
dc.identifier.wosWOS:000280214400004en_US
dc.identifier.wosqualityQ1en_US
dc.indekslendigikaynakWeb of Scienceen_US
dc.indekslendigikaynakScopusen_US
dc.institutionauthorKesen, Saadettin Erhan
dc.language.isoenen_US
dc.publisherElsevier Science Bven_US
dc.relation.ispartofInternational Journal of Production Economicsen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/openAccessen_US
dc.selcuk20240510_oaigen_US
dc.subjectLost salesen_US
dc.subjectSupply chain flexibilityen_US
dc.subjectSupplier selectionen_US
dc.titleEvaluating Supply Chain Flexibility with Order Quantity Constraints and Lost Salesen_US
dc.typeArticleen_US

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