Supply Chain Management With Third-Party Logistics

No matter whether the study is on the whole supply chain or part of it, traditional supply chain modeling researches, which basically aim to maximize profits or to minimize costs, seek to find the optimum strategies with a objective function built under several hypotheses and constraints. However, the real supply chain pursues far more than maximum profit. The member companies constitute the supply chain system in a complex way. In order to keep the system running normally under uncertainties and resist random risks that may cause supply chain disruptions, the members have to make adjustment in production, inventory, supply, delivery and more. Clearly, all these adjustments will make the costs higher. The objective of adjustment is to improve efficiency and quality of the supply chain system. Essentially, it is a reliability case.Based on the background above, this paper analyzes a supply chain system composed of retailer, supplier and the third-party logistics provider, discusses the properties of supply chain disruption in random environment, then defines the reliability of the supply chain, creates the gross profit function and the reliability function, constructs a stochastic model for the supply chain system. Gross profit is a monotonically decreasing random function depending on costs, and reliability is a monotonically increasing random function of costs. The goal of this model is to find the strategy to coordinate between profit and reliability and optimize the supply chain system under certain conditions.This paper defines the supply chain reliability as the capacity that the supply chain system functions smoothly to provide products and services successfully in a period of time, including the prompt delivery reliability and the sufficient quantity reliability. The research shows that the total cost of supply chain system is composed of production cost, Inventory cost and the third-party logistics cost. The profit and reliability, which are a pair of contradictory variables of costs, are fundamentally determined by the distribution of costs among the three member companies.There have never been researches on profit problem of supply chain system with the third-party logistics based on a reliability perspective so far. Therefore, as an exploratory study, this paper introduces the reliability into supply chain research, constructs the reliability mechanism of tripartite supply chain system based on the stochastic process theory, quantificationally describes the relationships among the supply chain reliability and profit, cost, production capacity and inventory capacity, sets up a general framework for this kind of case, analyzes the basic properties of the model by MATLAB software, finally verifies the properties with a case study. The next step of the study is to obtain the exact solution of the model mathematically.