Processing Relocation In A Supply Chain Under Supply Uncertainty

In the increasing competitive market, supply chain relocates operation process to satisfy diversified external market demand and internal individual processing requirement. For supply chain’s processing in sale segment, more and more suppliers or manufactures offer processing relocation policy for retailers to satisfy their individual processing requirement. Processing relocation policy could realize individual demand and advantage unit processing cost, but it may also cause uncertain supply and increase supplies’operation cost. Therefore, how to trade off the positive and negative effect caused by offering processing relocation policy, is an important question with theoretical value and practical significance. This thesis studied processing relocation in a supply chain under supply uncertainty, based on newsboy model, risk management and the related theories on supply chain management. The main content of this thesis has three sections.In the first section, processing relocation model for risk neutral supply chain and risk aversion supply chain under certain demand are built respectively, and the optimal processing relocation decision and its influence factors are examined. For risk neutral supply chain, supply chain’s profit model is built only considering overproduction cost, results show that the unit processing cost between supplier and retailer influence the optimal processing relocation strategy directly for different industry supply chain. For risk aversion supply chain, supply chain’s profit model is built with parameter of risk aversion and considering lost sales and overproduction cost, results show that cost structure’s impact to optimal processing relocation strategy would be weaken due to risk sensitivity.In the second section, the processing relocation strategies under stochastic demand are analyzed. For risk neutral supply chain, supply chain’s profit model with supply and demand uncertainty is built, results show that unit processing cost structure also influence the increase and concavity property, but the profit level of supply chain would be decrease with demand fluctuation increasing. For risk aversion supply chain, supply and demand uncertainty lead to loss risk of stock-out and overproduction, results show that unit processing cost, risk sensitivity and demand fluctuation synthetically influence optimal processing relocation strategy to obtain maximize profit.In the third section, supply chain’s profit with processing relocation or not is the contrasted and analyzed. Results show supply chain’s processing cost influences optimal processing relocation strategy directly, meanwhile, optimal processing relocation decision is limited by demand fluctuation and risk sensitivity. The profit level of risk neutral supply chain is always higher than risk aversion supply chain’s.