Journal
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Volume 59, Issue 1, Pages 226-244Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/00207543.2020.1748248
Keywords
supply chain disruption; capacity allocation; supply uncertainty; service level agreement; inventory management
Ask authors/readers for more resources
This study finds that the two-stage policy outperforms other capacity allocation policies in the presence of supply disruption. Partial disruption is more manageable compared to full disruption. Additionally, in cases with fixed penalty rates, suppliers are better off negotiating longer performance review periods.
This paper studies the impact of capacity/inventory disruption on a supplier's cost, where the supplier has heterogeneous service level agreements (SLAs) in place with multiple customers (retailers). We compare three capacity allocation policies in the presence of supply disruption, with both full and partial disruption cases investigated. The results show that the two-stage policy outperforms other capacity allocation policies when a disruption is anticipated and that partial disruption is more manageable than full disruption in terms of meeting the SLAs. Furthermore, the supplier is better off to negotiate a longer performance review period assuming the penalty per time unit is fixed. This result is contrary to findings in the literature for SLAs when there is no consideration of disruption. The insights from this study can assist suppliers in determining their capacity level, making capacity-related decisions such as locations of warehouses or production sites, in allocating capacity to customers and in negotiating SLA terms such as the performance review period length and penalty rates.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available