On A Two-Stage Supply Chain Model In The Manufacturing Industry

Abstract

We model a two-stage supply chain where the upstream stage (stage 2) always meet demand from the downstream stage (stage 1).Demand is stochastic hence shortages will occasionally occur at stage 2. Stage 2 must fill these shortages by expediting using overtime production and/or backordering. We derive optimal inventory control policies under Decentralized, Coordinated and Centralized control. The centralized control model is applied to a manufacturing industry (Associated Match Industry,Ibadan).