Optimal Control Of Decoupling Point In Conjunction With The Production Inventory Management

Economic globalization makes the customer-driven segments becoming more international, dynamic and unpredictable. On the one hand, product life cycles are getting shorter, which makes deterioration becomes an important attributes of goods; on the other hand, the customer demands are diversification and personalization, and its influence on the enterprise's inner operational workings are more and more deeply. A decoupling point (DP) is a push-pull boundary to separate the forecast-driven activities from the order-driven activities. The position of decoupling point indicates how deeply the customer order penetrates into the supply chain. And the appropriate location of it can achieve the balance between efficiency and flexibility in supply chain. This paper introduces the customer demand with decoupling point into the production and inventory management to make a joint research of these dynamic control problems.First, the researches on production and inventory management as well as the control of decoupling point are reviewed and summarized. Secondly, we introduce the relevant theories of customer order decoupling point. The connotations of decoupling point are explained and its influences on supply chain models are analyzed. A mechanism is formed to investigate the reasons effects of shifting the DP up and down on the supply chain. Based on the assumption of constant demand rate, a dynamic model is proposed to simultaneously determine the optimal position of decoupling point and production-inventory plan. We perform analytical and numerical analysis on the behavior of the optimal solutions and the effect of parameters when the production smoothing policy and the zero-inventory policy are applied. In addition, the deteriorating goods are introduced into the dynamic model, with the assumption that the target setting are satisfied the state equation, we analyze the influence of deteriorating rate and the product life cycle on the optimal decoupling point. Finally, a general dynamic model with liberal assumptions is proposed while the deteriorating rate and time-varying demand are under consideration. Mathematic and numerical analyses are performed to illustrate the effect of time-varying demand rate and deteriorating rate on the optimal position decoupling point, moreover, the behavior of the optimal production and inventory rate are discussed.The results indicate that under the production smoothing policy, the overestimation of demand rate during the pre-decoupling stage guarantees the existence of the optimal decoupling point; meanwhile the optimal decoupling point exists under zero-inventory policy when the demand rate is underestimated. The optimal position of decoupling point is monotonically decreasing with deterioration rate and product life cycle. These imply that the increasing of deteriorating rate shifts the optimal decoupling point backward to the upstream to avoid the high inventory cost, while a forward shifting to end customers appears to condense the delivery time when the product life cycle become shorter. In addition, the optimal decoupling is an ascending function of demand rate. It denote that the enterprise should keep a number of inventory and move the optimal decoupling point to the end customers to make a quick response when the customer demand increasing rapidly; meanwhile a tardily decreasing of market demand lead to a backward shifting to prevent the cost of inventory and the risk of funds occupation, at last to improve the performance of supply chain.