Table Of ContentSupply Chain Planning
Hans-Otto Günther Herbert Meyr
•
Editors
Supply Chain Planning
Quantitative Decision Support
and Advanced Planning Solutions
Prof. Dr. Hans-Otto Günther Prof. Dr. Herbert Meyr
TU Berlin H 95 TU Darmstadt
Department of Production Management Department of Production
Straße des 17. Juni 135 and Supply Chain Management
10623 Berlin Hochschulstr. 1
Germany 64289 Darmstadt
[email protected] Germany
[email protected]
ISBN 978-3-540-93774-6 e-ISBN 978-3-540-93775-3
DOI 10.1007/978-3-540-93775-3
Library of Congress Control Number: 2008943995
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Preface
Inrecentyears,supplychainplanninghasemergedasoneofthemostchallenging
problemsintheindustry.Asaconsequence,theplanningfocusisshiftingfromthe
managementofplant-specificoperationsto a holisticview ofthevariouslogistics
andproductionstages,thatisanapproachinwhichsuppliers,productionplantsand
customers are considered as constituents of an integrated network. A major driv-
ing forcebehindthis developmentlies in the globalizationof the world economy,
whichhasfacilitatedtheco-operationbetweendifferentpartnersworkingtogether
in world-widelogistics networks.Hence, considerablecost savings can be gained
fromoptimizingthestructureandtheoperationsofcomplexsupplynetworkslink-
ingplants,suppliers,distributioncentresandcustomers.Consequently,toimprove
the performanceof the entire logistic chain, more sophisticated planning systems
andmoreeffectivedecisionsupportareneeded.
Clearly, successful applications of supply chain management have driven the
developmentofadvancedplanningsystems(APS),whichareconcernedwithsup-
portingdecision-makingactivitiesatthestrategic,tacticalandoperationaldecision
level. These software packages basically rely on the application of quantitative
methods,whichareusedtomodeltheunderlyingcomplexdecisionproblemscon-
sidering the limited availability of resources and the need to react on time to
customer orders. The core module at the mid-term level of APS comprises oper-
ationalsupplychainplanning.Inmanyindustries,productionstagesareassignedto
differentplantsanddistributioncentreshavebeenestablishedatgeographicallydis-
persedlocations.Supplychainplanningaimsatcoordinatingproductionactivities
withinsuchmulti-sitelogisticsnetworkstoavoidexcessiveinventories,inefficient
capacityutilizationandpoorcustomerservice.InAPS,advancedoptimizationtech-
niquesareprovidedtodeterminethequantitiestobeproduced,stored,transported
andprocuredinthesupplynetwork.
This book is divided into five parts. The first one is concerned with decision-
making in supply chains. The paper by Hartmut Stadtler addresses issues of
collaborationininter-organizationalsupplychains.Itanalyzesandclusterstheap-
proachesthat have been developed since the adventof supply chain management
about two decades ago and gives an overview on the state-of-the-art. Moreover,
the paper provides a framework for collaborative planning in supply chains, with
v
vi Preface
specialemphasisonmodel-baseddecisionsupportattheoperationallevelofinter-
organizationalsupplychains.
In their paper, Christian Almeder, Margaretha Preusser and Richard F. Hartl
present a general framework for combining an optimization model and discrete
eventsimulationto supportsupply chain planning.Both modelsare applied in an
iterativefashionuntilconvergenceisreached.Itisshownthatthisapproachdeliv-
erscompetitiveresultsmuchfastercomparedtomixed-integerlinearprogramming
modelsinastochasticenvironment.
Part 2 comprises five papers on demand management and order fulfillment in
supply chains. Revenue management is a topic that has received great attention
in service and recently also in manufacturing industries. In their paper, Rainer
Quante,HerbertMeyrandMoritzFleischmannanalyzetheunderlyingsupplychain
processesofrevenuemanagementanddemandfulfilmentindifferentbusinessenvi-
ronments.Inparticular,theydiscussandclarifytherelationshipsbetweenavailable
software solutions and applications as well as scientific models in this field and
highlightdirectionsoffutureresearch.
A systematic mathematicalprogrammingapproachforactive demandmanage-
mentinprocessindustriesispresentedbyAaronA.LevisandLazarosPapageorgiou.
They develop an iterative algorithm for supporting decision-making on pricing
strategies as well as on output levels for substitute products. Several case studies
areusedtoobtaingame-theoreticalinsightsforaduopolisticmarketsituation.
The paper by Herbert Meyr focuseson the segmentationof customers and the
allocationofavailablequantities.Itisshownthatthecurrentpracticeofrule-based
order promising can be improved by exploiting information on customer hetero-
geneityandcustomerdemand.Asapracticaltool,deterministiclinearprogramming
models to support available-to-promisedecisions in a make-to-stockenvironment
arepresented.
In their paper, Thomas R. Ervolina, Markus Ettl, Young M. Lee and Daniel J.
Peters propose a novel management process for determining marketable product
alternativesinasupplychain.Theirapproachaimsatbetterintegratingthesupply
chainhorizontallybyconnectingtheactivitiesofcustomers,businesspartnersand
salesteamstoprocurementandmanufacturingcapabilitiesofafirm.Theproposed
mathematicaloptimizationbased approachhas contributedto substantial business
improvementsatIBM.
The paperby RichardPibernik and PrashantYadavfocusesonreal-time order
promising in a make-to-stock environment. An integrated approach is developed
thatexploitsthestructureoforderarrivalsandmaterialreceiptstodetermineinven-
toryreservationsforhigh-priorityordersinrealtime.Inacomprehensivenumerical
study,theimpactofinventoryreservationandorderpromisingisinvestigatedunder
varyingsystemparameters.
ThethreepapersincludedinPart3ofthisbookfocusoninventorymanagement.
Insupplychains,safetystocksareneededtobemoreresponsivetocustomerorders
andtomeetthetargetservicelevels.YoussefBoulaksil,JanC.FransooandErnico
N.G.vanHalmproposeacombinationofanoptimizationandasimulationmodel.
They apply this hybrid modeling approach to determine safety stock levels in a
Preface vii
multi-item multi-stage inventory system. As a case study, the supply chain of a
biopharmaceuticalcompanyisconsidered.
ThepaperbyPieterL.M.vanNyen,J.WillM.Bertrand,HennyP.G.vanOoijen
and Nico J. Vandaele investigates the impact of different variants of supplier-
managedinventoryoncostsinasupplychainconsistingofapartssupplierandan
originalequipmentmanufacturer’sassemblyplant.Numericalexperimentsrevealed
thatsubstantialsystem-widecostsavingscouldbe gainedcomparedtoa situation
inwhichtheassemblyplantmanagestheinventories.
Inthesubsequentpaperonvendor-managedinventory,BogdanC.Bichescuand
MichaelJ.Fryanalyzedecentralizedsupplychainsunderdifferentdegreesofchan-
nel power, that is the agents’ ability to control the decision-making process in a
supply chain. Game-theoretical models are used to compare the effectiveness of
vendor-managedinventoryandtoanalyzedifferentchannelpowerrelationshipsun-
deravarietyofenvironmentalconditions.
Applications of supply chain planning in the chemical industry are presented
in Part 4. The concept of value chain management can be seen as another chal-
lengingextensionofclassicalsupplychainmanagement.Consideringacasestudy
from the chemical industry,Matthias Kannegiesser, Hans-Otto Gu¨nther, Paul van
Beek, Martin Grunow and Christoph Habla present an operative planning model
for coordinating sales, distribution and production activities throughout a global
valuechain.Specifically,theoptimizationmodeladdressesspotdemandforchem-
icalcommoditieswith volatileanduncertainsalespricesandevaluatesthe impact
oftherespectiveprice-quantityelasticity.
Anoptimizationmodelbasedonmixed-integerlinearprogrammingtoschedule
campaignsinaspecialtychemicalsplantispresentedbyMarcusBrandenburgand
Franz-JosefTo¨lle. Theyfocuson a real-worldproblem,whichis characterizedby
a variety of chemical processes with sequence-dependent setup conditions, com-
plexmaterialflows,flexibleuseofresourcesandfacility-dependentbatchsizes.To
solvethiscomplexschedulingproblem,atwo-stagesolutionprocedureisapplied,
which determinesnear-optimalscheduleseven for large-sizedreal-worldproblem
instanceswithinreasonableCPUtime.
Finally, two papers with applications in the automotive industry are presented
in Part 5. The paper by Herbert Meyr, originallypublishedin 2004,first givesan
overview of short- and mid-term approaches for supply network planning in the
automotiveindustryandspecificallydiscussestheapplicationofORmethodology
tosupportthevariousplanningtasksinvolved.Afterwards,theauthordiscussesthe
impactoftheongoingchangeinstrategy,namelythechangefromabuilt-to-stock
orientedtoacustomizedbuilt-to-orderproduction,onthefutureapplicationofOR
methods.
The final paper by Ralf Bihlmaier, Achim Koberstein and Rene´ Obst considers
strategic flexibility and capacity planning under uncertain demand in production
networksofautomobilemanufacturers.Theirsolutionapproachisintegratedintoa
decisionsupportsystem,whichdeterminesminimum-costproductallocationsand
developstacticalworkforceplans.Thepracticalityoftheirapproachisdemonstrated
bytheuseofanindustrialcasestudy.
viii Preface
Theprimaryobjectiveofthisbookistoreflecttherecentdevelopmentsofsup-
plychainplanningandtoexaminenewresearchissues.Itpresentsrecentresearch
resultsoncollaborativeplanninginsupplychains,demandandinventorymanage-
mentinlogisticsnetworksaswellasindustrialapplications.Thespecific focusof
this book is on the application of quantitative methods, which also form the ba-
sisofcommercialadvancedplanningsoftwaresystems.Fourteenpaperspreviously
publishedin“ORSpectrum–QuantitativeApproachesinManagement”havebeen
selectedforpublicationinthisvolume.Allpapershavebeenpeer-reviewedaccord-
ingtothestandardsofthejournal.
Thisbookhasgreatlybenefitedfromthecooperationamongtheauthors,review-
ers and editors. We expressour sincere thanks to the reviewersfor their excellent
and timely refereeing. Last, but not least, we thank all authors for their contribu-
tions,whichmadethisbookpossible.
Berlin and Darmstadt, Hans-OttoGu¨nther
February 2009 HerbertMeyr
Contents
Part I: Decision Making in Supply Chains
A framework for collaborative planning and state-of-the-art...........................3
H. Stadtler
Simulation and optimization of supply chains: alternative
or complementary approaches?..........................................................................29
C. Almeder, M. Preusser, R.F. Hartl
Part II: Demand Management
Revenue management and demand fulfillment: matching applications,
models and software.............................................................................................57
R. Quante, H. Meyr, M. Fleischmann
Active demand management for substitute products through price
optimisation...........................................................................................................89
A.A. Levis, L.G. Papageorgiou
Customer segmentation, allocation planning and order promising
in make-to-stock production.............................................................................117
H. Meyr
Managing product availability in an assemble-to-order supply
chain with multiple customer segments...........................................................145
T.R. Ervolina, M. Ettl, Y.M. Lee, D.J. Peters
ix
x Contents
Inventory reservation and real-time order promising
in a make-to-stock system..................................................................................169
R. Pibernik, P. Yadav
Part III: Inventory Management
Setting safety stocks in multi-stage inventory systems under rolling horizon
mathematical programming models.................................................................199
Y. Boulaksil, J.C. Fransoo, E.N.G. van Halm
Supplier managed inventory in the OEM supply chain: the impact
of relationship types on total costs and cost distribution................................219
P.L.M. van Nyen, J.W.M. Bertrand, H.P.G. van Ooijen, N.J. Vandaele
Vendor-managed inventory and the effect of channel power........................247
B.C. Bichescu, M.J. Fry
Part IV: Applications in the Chemical Industry
Value chain management for commodities: a case study
from the chemical industry................................................................................283
M. Kannegiesser, H.-O. Günther, P. van Beek, M. Grunow, C. Habla
MILP-based campaign scheduling in a specialty chemicals plant:
a case study..........................................................................................................315
M. Brandenburg, F.-J. Tölle
Part V: Applications in the Automotive Industry
Supply chain planning in the German automotive industry..........................343
H. Meyr
Modeling and optimizing of strategic and tactical production planning
in the automotive industry under uncertainty.................................................367
R. Bihlmaier, A. Koberstein, R. Obst
