Optimization of End-to-end Supply Chain Costs to Maximize Revenue and Profits From Supply Chain Operations

Abstract

Being aware that the supply chain costs claim a substantial share in the final product cost, organizations, in an effort to improve revenue and increase profitability, should minimize supply chain costs invariably. Besides other costs, supply chain costs vary from time to time depending on the sourcing, transportation, and inventory-related costs. Improving the operational efficiency of the supply chain has become the primary objective for increasing profitability from supply chain operations in present-day context. In reality, supply chain operations are complex with uncertainty predominantly influencing various costs associated with supply chains affecting return on investments and profitability. Supply chain cost optimization should enable the supply chain managers to ensure that the supply chain is ‘responsive’, ‘agile’, and ‘reinvented’ for present and future operations. Optimization of supply chain costs bestows improving operating efficiency that promotes improvements in revenue and increment in profits. The present article aims at considering various supply chains cost parameters such as total operating costs, profit, revenue, logistics costs, and information sharing costs for optimization of supply chain costs using multi-objective optimization. A generic three-stage supply chain model with usual entities like suppliers, manufacturers, and customer zones is assumed in the present article. A trade-off curve among the selected objective function sets and relevant constraints was developed and presented in the article. The trade-off curve provides the basis for decision-makers to better understand the supply chain optimization effect on the selected objective function set elements to make the present and future supply chains promote startling ‘profitability’ and increase revenue generation in operations.