The effects of transportation variance and batch sizes on the performance of a supply chain

Abstract

Inventory management and transportation are important issues in Supply Chain (SC) Management.The application of Just-In-Time (JIT) to address inventory issues in SC has been investigated by various researchers. JIT requires a reliable transportation system in order to work elciently.Another issue of importance i s transportation batch size. This paper prrsents the results of simulation experiments to investigate the effect of transportation lead-time variability and batch size on the performance of a four echelon Kanban-ConWIP. The performance was evaluated based an customer service level, total system inventories and inventory at individual nodes. The findings of the study show that variance in transportation lead-time must be controlled at low levels. If a fixed batch size is to be specified across the SC, slightly lower batch sizes are preferable to very law or large batch sizes. For variable batch sire, it should be fixed at approximately 40% of destination node inventory capacity. Kqworri-Just In Time, Supply Chain Managemenf Transportation batch size, Transportation lead-time variance I. I N T R O D U~I O N Supply Chain Management (SCM) requires integration across all supply chain (SC) players [l].Amongst others, inventory management and transportation are important issues in SCM [2] and these can longer be considered separate business activities but rather part and parcel of integrated SCM operations.The application of Just-In-Time (JIT) to address inventory issues in SC has been investigated by various researchers, ranging from surveys (such as in 131, 141, and [5]) to operational aspects (such as in (61, 171, [8], and 191).JIT is designed for relatively deterministic environment and requires a reliable system in order to work efficiently [lo]. Thus reliable transportation is a necessity in a JIT supply chain [ll]. Reliability is usually represented by variance [12]. Reference 191 studied the effect of system variability (transportation and nodes variability) on the performance of a JIT-Basestock three echelons SC, and found that reducing variance can help in reducing the distributor's base stock level and safety stock (better or as important as reducing demand uncertainty).Another important issue related to transportation is transportation batch size. Issues in batch size include decisions on whether to vary or fix the batch size. Some researchers, such as [6] and [9] suggest varying the batch size according to order size and some prefer fixing it. Reference [13], for instance, suggest that the batch size should be fixed near the mean of demand. Reference [7], in their study on joint optimal integrated inventory replenishment policy in a JlT system, suggested that the delivery hatch size should be fixed in order to developed an optimal supply chain. Reference [8] extended the study by introducing uncertainties in delivery utilized this ideas. Reference [9] dealt only with a JIT-Basestock SC. Reference [14] have demonstrated that other JIT systems can improve the performance of a four echelon SC. They fou...

The strategic design of port services based on a total landed cost approach

“…The importance of inventory and transportation costs as well as lead time on supply chains Several authors have focused on the analysis of the different factors that affect total logistics costs (and hence, TLCs) of global supply chains. Lair et al (2004) focus on the relevance of inventory and transportation, analyzing the impact of lead time variability and show the importance of transportation methods and proper ordering policies on the whole efficiency of the supply chain. Young et al (2004) present an approach that consider TLCs models as support decision tools for the sourcing of offshore products.…”