Design of six sigma supply chains

Garg, D. ; Narahari, Y. ; Viswanadham, N. (2004) Design of six sigma supply chains IEEE Transactions on Automation Science and Engineering, 1 (1). pp. 38-57. ISSN 1545-5955

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Variability reduction and business-process synchronization are acknowledged as keys to achieving sharp and timely deliveries in supply-chain networks. In this paper, we introduce a new notion, which we call six sigma supply chains to describe and quantify supply chains with sharp and timely deliveries, and develop an innovative approach for designing such networks. The approach developed in this paper is founded on an intriguing connection between mechanical design tolerancing and supply-chain lead-time compression. We show that the design of six sigma supply chains can be formulated as a mathematical programming problem, opening up a rich new framework for studying supply-chain design optimization problems. To show the efficacy of the notion and the design methodology, we focus on a design optimization problem, which we call the inventory optimization (IOPT) problem. Given a multistage supply-chain network, the IOPT problem seeks to find optimal allocation of lead time variabilities and inventories to individual stages, so as to achieve required levels of delivery performance in a cost-effective way. We formulate and solve the IOPT problem for a four-stage make-to-order liquid petroleum gas supply chain. The solution of the problem offers rich insights into inventory-service level tradeoffs in supply-chain networks and proves the potential of the new approach presented in this paper.

Item Type:Article
Source:Copyright of this article belongs to Institute of Electrical and Electronic Engineers.
ID Code:30363
Deposited On:22 Dec 2010 10:25
Last Modified:17 May 2016 13:01

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