Impact of safety factors and setup time reduction in a two-echelon supply chain management

Abstract

A two-echelon supply chain model is formulated to reduce lead time and setup time to obtain their impacts on the expected total cost when lead time demand is stochastic in nature. Two different safety factors are utilized to avoid shortages even though the system contains backorder. The lead time is lot size dependent and consists of production time as well as setup time. It does not follow any particular distribution as only mean and standard deviation are known to us. A distribution free approach is used here to handle this situation. Quality improvement and safety factor are related issues to make an impact in the model as they are directly related to the customer satisfaction. The unit production cost is variable and dependent on production rate. An analytical procedure is derived to investigate the effects of reducing lead time, setup time crashing cost, and transportation crashing cost. Some numerical examples are illustrated to test the model. Sensitivity analysis and managerial insights are given to show the applicability of the model.