Browsing by Author "Mieghem, Jan A. Van"
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- Dual sourcing and smoothing under nonstationary demand time series: reshoring with SpeedFactoriesPublication . Boute, Robert N.; Disney, Stephen M.; Gijsbrechts, Joren; Mieghem, Jan A. VanWe investigate near-shoring a small part of the global production to local SpeedFactories that serve only the variable demand. The short lead time of the responsive SpeedFactory reduces the risk of making large volumes in advance, yet it does not involve a complete reshoring of demand. Using a break-even analysis, we investigate the lead time, demand, and cost characteristics that make dual sourcing with a SpeedFactory desirable compared with complete off-shoring. Our analysis uses a linear generalization of the celebrated order-up-to inventory policy to settings where capacity costs exist. The policy allows for order smoothing to reduce capacity costs and performs well relative to the (unknown) optimal policy. We highlight the significant impact of auto-correlated and nonstationary demand series, which are prevalent in practice yet challenging to analyze, on the economic benefit of reshoring. Methodologically, we adopt a linear policy and normally distributed demand and use Zβtransforms to present exact analyses.
- Volume flexibility at responsive suppliers in reshoring decisions: analysis of a dual sourcing inventory modelPublication . Gijsbrechts, Joren; Boute, Robert N.; Disney, Stephen M.; Mieghem, Jan A. VanWe investigate how volume flexibility, defined by a sourcing cost premium beyond a base capacity, at a local responsive supplier impacts the decision to reshore supply. The buyer also has access to a remote supplier that is cheaper with no restrictions on volume flexibility. We show that with unit lead time difference between both suppliers, the optimal dual sourcing policy is a modified dual base-stock policy with three base-stock levels ππ1, ππ2, and ππ . The replenishment orders are generated by first placing a base order from the fast supplier of at most π units to raise the inventory position to ππ1, if that is possible. After this base order, if the adjusted inventory position is still below ππ2, additional units are ordered from the fast supplier at an overtime premium to reach ππ2. Finally, if the adjusted inventory position is below ππ , an order from the slow supplier is placed to bring the final inventory position to ππ . Surprisingly, in contrast to single sourcing with limited volume flexibility, a more complex dual sourcing model often results in a βsimplerβ policy that replaces demand in each period. The latter allows analytical insights into the sourcing split between the responsive and the remote supplier. Our analysis shows how increased volume flexibility at the responsive supplier promotes the decision to reshore operations and effectively serves as a cost benefit. It also shows how investing in base capacity or additional volume flexibility act as strategic substitutes.