Development of a Model for Simultaneous Cost-Risks Reduction in JIT Systems Using Multi-External and Local Backup Suppliers

Abstract

In many organisations, Just-In-Time (JIT) implementation plays a significant role in minimizing their excessive costs, and increasing their efficiency. However, the risks accompanying JIT strategies are often overlooked and affect system processes disrupting the entire chain of supply. This paper proposes an inventory model that can simultaneously reduce costs and risks in JIT systems. This model is developed in order to ascertain an optimal ordering strategy for procuring raw materials by using multi-external suppliers and local backup supplier to reduce the total cost of the products, and at the same time to reduce the risks associated with JIT supply within production systems. The effectiveness of the developed model is tested using an example problem with inbuilt disruption. A comparison between the cost of using the JIT system and using the inventory system shows the superiority of the use of the inventory policy.

A Genetic Algorithm for a Simultaneous Optimisation of Cost-Risk Reduction Under a Just-in-Time Adaption

“…All of them have a significant impact on the production facility and the entire supply chain as well. To avoid the impact of these risks, it is assumed that during a time of disruption, the production system can procure its raw materials or components/subassemblies required to produce the final product from a local backup supplier at a higher price but with low risk and in a short lead time (El Dabee et al, 2013b).…”

“…It is also assumed that in the case of one or more of external suppliers suffering disruption, the production system can procure its raw materials from seven local backup suppliers. The details of the simplified example are presented in (El Dabee et al, 2013b). Based on some experiments using different values of the GA basic parameters, the appropriate input parameters of the proposed GA are as shown in Table 2.…”

“…Businesses are exposed to numerous risks, particularly those originating from the supply chain. These risks potentially influence their processes by disrupting all supply chain members involved (El Dabee et al, 2013b;2013c). In this context, risk is defined as the combination of possible consequences and associated uncertainties (Aven and Vinnem, 2007).…”

A Novel Optimization Model for Simultaneous Cost-Risk Reduction in Multi-Suppliers Just-in-Time Systems

“…All of them have a significant impact on the production facility and the entire supply chain as well. To avoid the impact of these risks, it is assumed that during a time of disruption, the production system can procure its raw materials required to produce the final product from a Science Publications ICCNT local backup supplier at a higher price but with low risk and in a short lead time (El Dabee et al, 2013a).…”

“…However, some have ignored certain significant risks arising from implementing JIT. These risks potentially affect their processes by disrupting all supply chain parties involved (El Dabee et al, 2013a). For example, in 2011, businesses were drastically affected by natural disasters-the Japanese earthquake and tsunami and the floods in Thailand due to (BW, 2011;Krausmann and Cruz, 2013).…”