An Integrated Planning Model for a Multi Echelon Supply Chain within Mass Customization

Abstract

Product customization is considered as the widespread strategy for the actual market trend oriented toward customer focus. In this field, mass customization sights mainly to emerge economy of scale and economy of scope in order to integrate mass production principles with customization abilities. This research views the collaborative management through an integrated procurement, production and distribution mixed integer linear programming (MILP) as a planning modeling approach for a multi-echelon and multi-site supply chain within tactical decision level. The model formulation is based on dyadic relationships according to leaders and followers tradeoffs where the supply chain’s stakeholders are depicted as follows, a) customers: Original Equipment Manufacturers (OEMs) identified as leaders and (b) first-tier suppliers: customized products manufacturers (c) second-tier suppliers: raw material suppliers, identified as followers. The feasibility of the proposed model has been provided through its resolution to optimality by an exact method, the decision-making process is focused on the first-tier suppliers’ operations in order to satisfy the customized demands taking into account realistic characteristics of mass customization environment for the internal and external constraints through the supply chain. The illustration of the model is performed with an example from the automotive industry, a sensitivity analysis has been conducted in order to provide the main decision points through key parameters, for instance, the capacities threshold according to a defined demand level and its customized structure which contribute to highlight a constructive managerial insights.

Keywords

• multi echelon supply chain
• integrated supply chain
• mass customization
• product variety
• mixed integer linear programming