Increasing on time deliveries of tea based products by using type-2 service level and analyzing impacts of information sharing in food sector

Abstract

The aim of this thesis is two fold, the first one is to develop an inventory control strategy for the most valuable products of a food company to improve customer service by using type-2 service level. The second is to show impact of information sharing on the magnitudes of cost saving and inventory reduction with a two level supply chain that consists one retailer and one manufacturer with autocorrelated external demand occur at the retailer. In the first part, a target service level is set and the demand distributions are analyzed for the single product to determine decision rule parameters. The three distributions normal, exponential and Laplace are studied and decision rule parameters are determined for both desired target service level and current situation. Improvements which are provided by our inventory control model in terms of annual shortage, holding and setup costs are displayed. In the information sharing part, we develop a model of two level supply chains and analyze the benefits of information sharing to the chain between manufacturer and customer. Information sharing could alone provide significant inventory reduction and cost saving to the manufacturer. However, retailer can also have advantages such as use of vendor managed program to reduce the its overhead and processing costs or lead time reduction to reduce the retailer’s inventory cost, while it negotiates arrangements with the manufacturer before sharing sales information. Moreover, we show the impact of the replenishment lead time and shortage cost on information sharing by implementing the sensitivity analysis.