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Optimal Product Substitution and Dual Sourcing Strategy considering Reliability of Production Lines.

ABSTRACT: Most of the supply chain literature assumes that product substitution is an effective method to mitigate supply chain disruptions and that all production lines either survive or are disrupted together. Such assumptions, however, may not hold in the real world: (1) when there is a shortfall of all products, product substitution may be inadequate unless it is paired with other strategies such as dual sourcing; and (2) production lines do not survive forever and may fail. To relax such assumptions, this paper therefore investigates the situations that the manufacturer may optimize substitution policy and dual sourcing policy to cope with supply chain disruptions. The paper obtains and compares the optimal policies for both deterministic and stochastic demands. A real-world case is also studied to verify the effectiveness of the proposed model.

SUBMITTER: Wu D

PROVIDER: S-EPMC7255351 | biostudies-literature | 2020 Oct

REPOSITORIES: biostudies-literature

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Optimal Product Substitution and Dual Sourcing Strategy considering Reliability of Production Lines.

Wu Di D Gong Min M Peng Rui R Yan Xiangbin X Wu Shaomin S

Reliability engineering & system safety 20200523

Most of the supply chain literature assumes that product substitution is an effective method to mitigate supply chain disruptions and that all production lines either survive or are disrupted together. Such assumptions, however, may not hold in the real world: (1) when there is a shortfall of all products, product substitution may be inadequate unless it is paired with other strategies such as dual sourcing; and (2) production lines do not survive forever and may fail. To relax such assumptions, ...[more]

PMID: 34170996

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Project description:The battery driving mileage on a single charge and convenience of the charging stations affect Electric Vehicle's (EV) demand. This paper studies the optimal number of charging stations and EV's price strategy considering different component commonality configurations. Assume the EV manufacturer provides two types of EV and the two EVs have the same battery configuration (battery as a common part) or the same naked vehicle-EV without batteries (naked vehicle as a common part). And the common part could be configured with low or high quality. We discuss four scenarios with different common parts and different quality levels. For each scenario, we present the optimal number of the charging stations and EV prices. Then we compare the optimal solutions and manufacturer's profits in above four scenarios with numerical simulation and give some managerial insights. Our analysis reveals that (1) consumers' range anxiety towards battery will affect manufacturer's product configuration strategy, EVs' prices and demands. (2) large consumers' sensitivity towards charging station will corresponding to more charging station, high EV prices and demands. If consumers are very concerned about the charging convenience, high-end electric vehicles need to be launched first, then as customers' anxiety about charging decreases, the low quality EV could be developed and diffused. (3) the unit product cost reduction caused by the commonality may increase or decrease the EVs' prices, which depends on the relationship between the demand increment incurred by one more charging station and the cost coefficient of building the charging station. (4) The low quality naked vehicle as common component will increase both the number of the charging stations and the demand and the manufacturer is more likely to obtain high profits. (5) the cost saving coefficient of battery common parts has greater influence on the selection of commonality. When consumers' range anxiety towards battery is very high, manufacturers should choose low-quality naked vehicles or high-quality battery as common components.

Dataset Information

Optimal Product Substitution and Dual Sourcing Strategy considering Reliability of Production Lines.

Publications

Optimal Product Substitution and Dual Sourcing Strategy considering Reliability of Production Lines.

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