Supply Chain Structures: Coordination, Information and Optimization (International Series in Operati

Supply Chain Structures: Coordination, Information and Optimization ( International Series in Operations Research & Management Science):
Table of contents

In order for this system to be successful or for value to be created, quality information must be transferred efficiently since medical care received by patients relies heavily on information processing. Through exploring the value chain, managers can find any specific problem areas that can be altered to create enhanced quality for customers. Health care supply chain managements and inventory control management vary in complexity and managerial importance from scenario to scenario. However, a model to improve inventory management practices being employed in hospitals is vital because of the sizeable expenditures in this industry.

Due to the unique characteristics of the health care industry, a multi-item coordination should be considered. Also, supply chain management can be fitted into a planning framework. Other strategic approaches that have been explored in the area of health care supply chain management and inventory control are the outsourcing of distribution activities, allowing suppliers to manage inventory levels at various distribution points, and the use of common statistical techniques to achieve organizational and system goals.

The primary objective was to balance service and efficiency throughout the organization. Investigators identified three characteristics that fit hospital production control setting. These three characteristics include a demand that is larger than supply, restrictions on supply defined by contracting organizations, and high patient expectations on service quality.


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These five levels consist of patient planning and control, patient group planning and control, resources planning and control, patient volumes planning and control, and strategic planning. An EOQ model has been extended to a R,s,c,S model providing a steady framework for inventory control and supply chain management. This approach resulted in substantial gains, which were observed in improved service levels, reduction of costs, and substantially lower system costs, for the participating hospital.

This is proportional to the available free space. The reorder stock point is the sum of expected demand during the lead time plus the safety stock. The lead time is the refill time. The purpose of this framework is to inform decision-makers when grappling with the opposing forces they face in choosing a cost reduction strategy. Castles indicates that the trade-off between the number of orders and free storage space for a given service level can be expressed in a simple functional form depending on the remaining free storage space for cycle stock, so the function implicitly includes the service level trade-off.

For a fixed service level, the trade-off curve has a hyperbola shape that is shifted to the right with increasing service level requirement. This property allows a simple trade-off analysis that answers managerial questions including service level versus expected number of daily orders, number or drugs stored versus service levels, storage volume versus service level and worker capacity requirement, and extension on the number or drugs carried versus additional worker capacity requirement.

Creating a centralized system in hospitals will help control and integrate deterministic aspects of the health care supply chain. This integration will create more efficiency and in turn provide cost containment, inventory control, and added quality for customers.

However, it is only possible to predict and control deterministic factors of the hospital. In the future, research conducted may help to discover a model of way of predicting non-deterministic aspects of the hospital. Also hospital varies from one to the next more research should be done on developing a model based on both deterministic and non-deterministic factors, which can eventually be used as a universal model for more accurate predictions in the health care supply chain.

The most serious issue in health care is that its costs are too high and rising too quickly while the quality of service is lagging behind. They report the Axiomatic approach, which has been used to optimize many complex engineering systems, can be applied towards unraveling the complexity associated with a healthcare system and suggesting optimal design solutions. Their paper presents cases of the Axiomatic approach in health care including the improvement of patient flow in emergency rooms and organizational design for a multi-campus mental health hospital.

The recent rapid increase in the amount of medical information has pushed hospitals to confront an essential issue which is how to utilize healthcare information technology to improve healthcare services quality. Customer relationship management system CRMS is an innovative technology which facilitates the process to acquire, develop, and maintain customer relationships more efficiently and effectively. De Vries explores the process of reshaping a hospital inventory system of medicines by means of an exploratory case study.

The study indicates that decisions made during this reshaping process are heavily influenced by the dynamics of the relationships and interactions between the stakeholders involved in the project. There are also some strong indications especially in a health care setting, the existence of multiple stakeholders having a multi-goal focus regarding the inventory system can have a strong influence on the outcomes of inventory projects.

Onishi develops the FUGI Futures of Global Interdependence global modeling system, a scientific policy modeling and future simulation tool. This is a super complex dynamic system model using integrated multidisciplinary systems analysis where number of structural equations is over , Although common practices in reverse logistics and green supply chain management have been examined, neither practitioners nor researchers have complete knowledge on these activities since they vary in complexity and managerial significance from scenario to scenario.

They are often treated as a series of fairly independent activities rather than a business process and therefore more emphasis is given to the operational or tactical as opposed to the strategic level. As the demand for energy and raw materials continues to rise and the supply chain becomes more globalized and multi-organizational based, effective management strategies and principles are imperatively needed to reduce the ecological impact of industrial activity, enhance business efficiency, competitiveness, and sustainability.

Hence, a comprehensive and systematic approach to study reverse logistics and green supply chain management is necessary. As the closed-loop supply chain management has received increased attention in recent years, research on strategic factors is needed such that a theoretical framework may be established.

The integration of various functional areas, such as research and development, engineering and manufacturing, marketing and distribution, and information systems, should be explored to construct a systematic structure that is committed to the green supply chain. Greening efforts should be carried out throughout the entire supply chain, where coordination among downstream customers, midstream manufacturers, and upstream suppliers is imperative. Research efforts should be devoted to studying the information and data sharing among supply chain members in the setting of green supply chain management.

Technological innovations and applications bring new values to logistics and supply chain management. New technologies, such as global position systems GPS , geographical information systems GIS , and radio frequency identification RFID , have changed traditional logistics and supply chain operations. Although the research on such topics is available in recent years, most work focuses on supply chain systems with forward flows. Greater efforts are needed to obtain useful knowledge, develop practical principles, and provide meaningful insights into key questions such as: How to effectively use these intelligence systems in green supply chains?

What are the benefits, challenges, and consequences of using these technologies? There is no doubt that this will be one of the hottest research areas in the future. Integrated production and distribution problems have been studied quite extensively in the traditional supply chain context in the research. In contrast, existing solution methodologies and techniques for integrated scheduling of production, inventory, and distribution operations with bidirectional flows are very limited. On the other hand, in real-life practice, more and more original equipment manufacturers OEM are now engaged in the implementation of new business policies under which defective products, by-products, and products with short life cycles need to be brought back to the production sites for reengineering and remanufacturing.

The inherent complexity of reverse logistics and green operations make it a challenging work, and the coordination and management process are much more complicated than those in traditional networks. From both practical and academic viewpoints, integrated production and distribution problems involving bidirectional flows have the potential to receive more attention in the research in the future.

Lastly, current research on reverse logistics and green supply chain management has mostly been led by researchers in advanced economies e. European Union and the US. While the US tends to embrace liberal policies and green movements, European countries have strong environmental tradition characterized by both legislative and societal aspects.

However, reverse logistics and green supply chain management in developing countries are largely untouched in academic research. Hence, it would be necessary to extend current research and explore these issues in emerging economies, where green supply chain management represents an unprecedented opportunity for bringing additional value to the society and it should deserve more attention from practitioners, academicians, and researchers in the coming years. The act also establishes quality measures, requires providers to report data on these measures, provides more meaningful quality information to the public, and begins to pay providers and insurers for improved quality.

Siberman states that the increased use in health care data will also be utilized to change federal payment policies in order to provide consumers with incentives of quality and efficiency. More extensive research will provide models of efficient practices that will improve the health care supply chain. Patients can shop around through high-deductible insurance, employer- or government-subsidized health savings accounts, transparent pricing, and accurate information on clinical performance, etc.

As in any other well-behaved market, when patients shop, there is a link between financial reward and value for the individual patient. However, current absence of price competition, agency problems, and high barriers to entry in local markets are market failures that break this link in U. US hospitals spend millions of dollars on lost, misplaced and stolen equipment every year. For many health care manufacturers, the lot level visibility is lost as products proceed through the supply chain.

Radio frequency identification RFID makes it simple to provide traceability at each and every packaging level accessed throughout the health care supply chain. RFID can bring benefit inventory management and supply chain operations greatly since RFID improves both security and product handling. Also, it is possible for RFID labels to be read through multiple layers of packaging without operator intervention, which may reduce the labor and time required for product handling in the health care supply chain Black et al. The health care industry is still concerned about counterfeiting, diversion, mishandling, mislabeling and mistaken administration of prescription drugs.

Researchers are beginning to develop more intricate automated track-and-trace systems through the use of bar coding and RFID. In addition, the proposed model may be used to evaluate the equipment preparation and maintenance policies in hospitals with RFID, and could be easily extended to quantifying the benefits of RFID tracking systems in other industries. Virtually centralized supply chain management is one option that can assist healthcare supply chains by controlling costs and improving service.

Virtual centralization is integrating operations from the perspective market rather than the health system. An example of a virtual centralized supply chain is a consolidated service center CSC , which is jointly owned and managed by multiple hospitals and healthcare systems. A CSC brings together geographically based groups of hospitals to form single entities that work together to centralize contracting, procurement, distribution, and logistical operations.

Through the course of the next ten years, the new implementations will be tested and new models will be evaluated in order to improve health care coordination, transitions of care from one care setting to another, quality, health outcomes, and cost effectiveness and inventory control in the health care supply chain.

The concept of patient-centered medical homes offers a structure for integrating innovations that can transform the delivery of healthcare. In this setting, every patient can develop an ongoing relationship with a primary care physician supported by a team of caregivers through an electronic medical record, which facilitates coordinated communication and decisions. Access expands beyond the traditional physician office visit to satellite services tailored to individual needs.

Services center on whole-person care, including wellness and preventive counseling, as well as acute and chronic care. In order to be fully effective, there must be more emphasis on the link between supply chain and clinical care and outcomes. Comparative effectiveness research, evidence of superiority, quality, and patient-centered healthcare are all important considerations for optimal supply chain management.

Our world is changing rapidly and business practitioners, in corporation with academic researchers, must respond quickly and develop effective solution methodologies and techniques to handle these new challenges in systems with forward and reverse flows of materials, information, and capital among various supply chain entities. Green supply chain management is a promising area of practice and research given the fact that increased attention has been paid to environmental issues, economic benefits, as well as sustainability in recent years.

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In this article, we have provided a summary of the current research on reverse logistics and green supply chain management which has a relatively short history since the s. Our main goal is to analyze the evolution and characteristics of the research on such topics and provide ideas and directions for future research. The recent development in reverse logistics and green supply chain management is encouraging and has revealed important findings, which shed more lights on varied areas, ranging from green product and process design, remanufacturing and reengineering, to reverse network design and waste management.

Based on our analysis, we found that researchers have explored both strategic and tactical topics, with more interests given to the latter area. Both qualitative and quantitative methods are applied in the research for achieving conceptual and operational knowledge. Considerable efforts have been devoted to studying product recovery and recycling, reverse logistics models, production and inventory systems, as well as multi-echelon green supply chains. These research activities are both relevant and of great significance, which have laid the foundation for further investigations.

With a substantial large number of variables, constraints, and parameters, the problems with which we are dealing in green supply chain systems are much more complicated than those in traditional forward supply chains. Moreover, the inherent complexity of environmental issues poses serious challenges to business managers and researchers.

Traditional modeling methods and solutions, which are widely available, are no longer suitable for these situations and innovative research approaches and techniques must be developed.


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We have highlighted several directions for future research on green supply chain management, which include, for instance, closed-loop supply chains, new information technologies, integrated supply chain systems with bidirectional flows, and green supply chains in emerging markets. In fact, they tend to be strategic and unstructured in general with more requirements in the areas of intra- and inter-firm collaboration and diffusion of best practices. Many changes in policies, practices, concepts, and technologies can be expected in the years to come, which can bring fresh opportunities for meaningful academic research in green supply chain management.

Certainly, healthcare supply chain management is unique, because unlike other industries, there are a wide and diverse range of items which need to be ordered on a daily basis in order for a hospital to operate effectively and efficiently. Products and services provided include medical consumables, pharmaceuticals, catering and food, laundry cleaning, waste management and disposal, home-care products, information technology, vehicle fleet management and general research supplies.

The manufacturers that supply the healthcare environment are, in most cases, restricted in their capacity to influence the final consumer patient or health professional. Critics of the American healthcare system recite a long list of problems, including rising out-of-pocket costs, inconvenient access, overuse of emergency departments, uncoordinated medical records, and declining numbers of primary care doctors. It is time to reinvent the system. Creating a centralized system in hospitals will help to control and integrate deterministic aspects of the health care supply chain.

Virtually centralized supply chain management, consumer-directed healthcare and patient-centered medical home hold big promise. European response to issues in recycling car plastics. Technovation, 19 12 , Business Horizons, 53 2 , RFIDs can improve the patient care supply chain.

Journal of Operations Management, 88 1 , An environmental life cycle optimization model for the European pulp and paper industry. Omega, 24 6 , The role of marketing in management. A detour on the road to integrated healthcare? Health Affairs , The health care value chain: The future of the welfare state: National health spending in Health Affairs, 26 1 , Container vessel scheduling with bidirectional flows.

Operations Research Letter, 35 2 , Quantitative models for closed-loop supply chains.

supply-chain-structures-coordination-information-and-optimization

Optimal short horizon distribution operations in reusable container systems. Journal of the Operational Research Society, 47 1 , The shaping of inventory systems in health services: International Journal of Production Economics , in press. How to control the costs of health care services — an inventory of strategic options. Healthcare Management Forum, 22 4 , A stochastic model for forward-reverse logistics network design under risk. Computers and Industry Engineering, 58 3 , Sixty-third World Health Assembly closes after passing multiple resolutions.

Retrieved July 30, , from http: The economics of tire remanufacturing. Resources, Conservation and Recycling, 19 4 , Critical factors of hospital adoption on CRM system: Organizational and information system perspectives. Decision Support Systems, 48 4 , Product recovery in stochastic remanufacturing system with multiple reuse options. European Journal of Operational Research, 1 , Forecasting the returns of reusable containers.

Journal of Operations Management, 8 1 , Pharmaceutical supply chain specifics and inventory solutions for a hospital. Journal of Operations Management, 14 1 , Reverse logistics strategy for product take-back. These are called coordination mechanisms or schemes, which control the flows of information , materials or service and financial assets along the chains.

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In general, a contracting scheme should consist of the following components: The appropriate planning methods are necessary for optimizing the behavior of the production. The second component should support the information visibility and transparency both within and among the partners and facilitates the realization of real-time enterprises. Finally, the third component should guarantee that the partners act upon to the common goals of the supply chain. The general method for studying coordination consists of two steps. At first, one assumes a central decision maker with complete information who solves the problem.

The result is a first-best solution which provides bound on the obtainable system-wide performance objective. In the second step one regards the decentralized problem and designs such a contract protocol that approaches or even achieves the performance of the first-best. A contract is said to coordinate the channel , if thereby the partners' optimal local decisions lead to optimal system-wide performance.

Therefore, the aim is often only the achievement of mutual benefit compared to the uncoordinated situation. Another widely studied alternative direction for channel coordination is the application of some negotiation protocols. For this reason, this approach is commonly referred to as collaborative planning.

The negotiation protocols can be characterized according to the following criteria:. An also commonly used instrument for aligning plans of different decision makers is the application of some auction mechanisms. There are several classifications of channel coordination contracts, but they are not complete, and the considered classes are not disjoint. Most of the related models consider either one-period horizon or two-period horizon with forecast update.

Besides, the horizon can consist of multiple periods and it can be even infinite. The practically most widespread approach is the rolling horizon planning , i. Almost all contract-based models regard only one product.

Channel coordination

Some models study the special cases of substitute or complementary products. However, considering more products in the general case is necessary if technological or financial constraints—like capacity or budget limits—exist. On one hand, the demand can be stochastic uncertain or deterministic. On the other hand, it can be considered static constant over time or dynamic e. In most of the models the players are regarded to be risk neutral.

This means that they intend to maximize their expected profit or minimize their expected costs. However, some studies regard risk averse players who want to find an acceptable trade-off considering both the expected value and the variance of the profit. The models differ in their attitude towards stockouts. Most authors consider either backlogs, when the demand must be fulfilled later at the expense of providing lower price or lost sales which also includes some theoretical costs e. Some models include a service level constraint, which limits the occurrence or quantity of expected stockouts.

This viewpoint shows the largest variations in the different models. The main decision variables are quantity-related production quantity, order quantity, number of options, etc.

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The parameters can be either constant or stochastic. The most common parameters are related to costs: These are optional; many models disregard fixed or inventory holding costs. There exist numerous other parameters: Most of the one-period models apply the newsvendor model. On two-period horizon, this is extended with the possibility of two production modes. On a multiple period horizon the base-stock , or in case of deterministic demand the EOQ models are the most widespread. In such cases the optimal solution can be determined with simple algebraic operations.

These simple models usually completely disregard technological constraints; however, in real industrial cases resource capacity, inventory or budget constraints may be relevant. This necessitates more complex models, such as LP , MIP , stochastic program , and thus more powerful mathematical programming techniques may be required.

As for the optimization criteria, the most usual objectives are the profit maximization or cost minimization , but other alternatives are also conceivable, e. Considering multiple criteria is not yet prevalent in the coordination literature. The most often studied dilemmas involve the two players and call them customer and supplier or buyer-seller.

There are also extensions of this simple model: Multi-echelon extensions are also conceivable, however, sparse in the literature. When the coordination is within a supply chain typically a customer-supplier relation , it is called vertical , otherwise horizontal. An example for the latter is when different suppliers of the same customer coordinate their transportation.

Sometimes the roles of the participants are also important. The most frequently considered companies are manufacturers , retailers , distributors or logistic companies. One of the most important characteristics of the coordination is the power relations of the players. The power is influenced by several factors, such as possessed process know-how , number of competitors , ratio in the value creation , access to the market and financial resources.

The players can behave in a cooperative or opportunistic way. In the former case, they share a common goal and act like a team, while in the latter situation each player is interested only in its own goals. These two behaviors are usually present in a mixed form, since the opportunistic claims for profitability and growth are sustainable usually only with a certain cooperative attitude.

The relation can be temporary or permanent. In the temporary case usually one- or two-period models are applied, or even an auction mechanism. However, the coordination is even more important in permanent relations, where the planning is usually done in a rolling horizon manner. When coordinating a permanent supply relation, one has to consider the learning effect , i. The simplest possible coordination is aimed only at aligning the material flows within the supply chain in order to gain executable plans and avoid shortages.


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In a more advanced form of coordination, the partners intend to improve supply chain performance by approaching or even achieving the optimal plan according to some criteria. Generally, a coordinated plan may incur losses for some of the players compared to the uncoordinated situation, which necessitates some kind of side-payment in order to provide a win-win situation.

In addition, even some sort of fairness may be required, but it is not only hard to guarantee, but even to define. Most of the coordination approaches requires that the goal should be achieved in an equilibrium in order to exclude the possibility that an opportunistic player deviates from the coordinated plan.

Some papers study the symmetric information case, when all of the players know exactly the same parameters. This approach is very convenient for cost and profit sharing , since all players know the incurring system cost. The asymmetric case, when there is an information gap between the players is more realistic, but poses new challenges.

The asymmetry typically concerns either the cost parameters, the capacities or the quantities like the demand forecast. The demand and the forecast are often considered to be qualitative , limited to only two possible values: In case of stochastic demand, the uncertainty of the forecasts can also be private information.