Two-Stage Supply Chain Inventory System Considering Production Postponement And Rework

This study proposes a basic framework for a supply chain inventory system considering postponement strategy and reworks policy. We consider a manufacturer that produces a generic component and orders other components from its supplier. The manufacturer then assembles the end-products with generic and other components under different production schedules considering backorder, rework, and scrap issues. Next, we construct a mathematical model for a supply chain system with the postponement and rework. In the model, we have investigated the effects of ordering frequency and production quantity on the total production costs. For comparisons, we have also developed a supply chain model with rework policy for the non-postponement inventory system. Finally, the numerical results are included to illustrate the validity of our proposed inventory system. The system is shown to reduce the scrap rate, improve the production of good items, and reduce the total production costs. Moreover, the proposed system can also reduce the number of ordering cycle, effectively enhance the manufacturer's dispatching ability and improve its responsive ability to drastic demand variations. Therefore, this study provides valuable insights to manage a supply chain with a similar production environment.