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Abstract
This paper considers how the optimal batch size can be determined in open supply chain environments where a manufacturing enterprise needs to select a raw material supplier and an outsourced manufacturer with diverse quality levels and process capabilities. Engineering design requirements for assuring product quality are defined by means of geometric dimensioning and tolerancing (GD&T), and the notion of product quality in the supply chain environment is employed in matching a supplier and a manufacturer in assessing the total production cost. A mathematical model that considers stochastic characteristics of material-induced variability and process-induced variability brought by suppliers and manufacturers is developed. To determine the optimal batch size, twofold steps are applied so that a predetermined level of product quality can be met and the total cost of production can be minimized. An example is provided to illustrate the method to determine the optimal batch size and supplier-manufacturer pair at the same time.
Key Words: Batch size, open supply chain, product/process variability, quality assurance
(ProQuest: ... denotes formulae omited.)
1.Introduction
Recently, outsourcing has become widely adopted as a competitive strategy in the manufacturing sector. This environment imposes several new challenges on how to increase benefits for the manufacturing enterprises by managing the value chains effectively and efficiently. Recent advances and proliferation of information technologies have changed the way enterprises locate their potential manufacturing partners around the world [1]. In particular, advances in the Internet have made it possible to connect manufacturing enterprises around the world electronically, which has led to a concept of an open supply chain [2]. However, many of previous research focus on cost-minimization within an enterprise-level supply chain environment rather than manufacturing activities that several supply chain parties are involved.
In this regard, to achieve an acceptable quality level for a product, two important factors should be taken into account in a supply chain environment: quality of raw material provided by suppliers and capability of outsourced manufacturers. Therefore, it is important to identify and match a supplier and a manufacturer to form a collaborative production process in consideration of quality assurance.
Since no supplier can provide raw material of perfect quality and no manufacture can guarantee perfect processes, a certain degree of variability should be considered in outsourcing strategies. More specifically,...