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Supply Chain Management in Apparel Industry: a Transshipment Problem with Time Constraints

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Supply Chain Management in Apparel Industry: a Transshipment Problem with Time Constraints (REFEREED RESEARCH) SUPPLY CHAIN MANAGEMENT IN APPAREL INDUSTRY: A TRANSSHIPMENT PROBLEM WITH TIME CONSTRAINTS HAZIR GİYİM ENDÜSTRİSİNDE TEDARİK ZİNCİRİ YÖNETİMİ: ZAMAN KISITLI BİR AKTARIM PROBLEMİ Deniz Türsel ELIIYI Emine Zehra YURTKULU Dicle YURDAKUL ŞAHİN Izmir University of Economics Izmir University of Economics Izmir University of Economics Department of Industrial Systems Engineering Department of Logistics Management Department of Business e-mail: [email protected] Administration ABSTRACT Supply chain management is one of the main sources of competitive advantage for companies. As a useful tool for inventory and transportation management in supply chains, transshipment points provide an effective mechanism for correcting discrepancies between demand and available inventory. This study aims to model the transshipment problem of a company in the apparel industry with multiple subcontractors and customers, and a transshipment depot in between. Unlike a typical transshipment problem that considers only the total cost of transportation, our model also considers the supplier lead times and the customer due dates in the system and it can be used for both supplier selection and timely distribution planning. The proposed model can also be adapted easily by other companies in the industry. Keywords: Transshipment problem, Lead time constraints, Apparel industry. ÖZET Tedarik zinciri yönetimi şirketler için rekabet avantajı sağlamadaki temel kaynaklardan birini oluşturmaktadır. Tedarik zincirlerinde envanter ve ulaştırma yönetimi konusunda faydalı kullanımları olan aktarım noktaları özellikle talep ve envanter miktarı arasındaki farkı kapatma konusunda etkin bir mekanizma sunmaktadır. Bu çalışmanın amacı hazır giyim sektöründe birden çok fason imalatçı ve müşteri ile faaliyet gösteren ve aktarım deposuna sahip bir şirketin aktarım probleminin modellenmesidir. Yalnızca toplam maliyeti minimize etmeyi amaçlayan tipik aktarım modellerinden farklı olarak modelimiz tedarik sürelerini ve müşterilerin termin zamanlarını da dikkate almakta, bu sayede hem tedarikçi seçiminde hem de zamanında dağıtım planlamasında kullanılabilmektedir. Önerilen model sektördeki diğer firmalar için de kolaylıkla adapte edilebilir. Anahtar Kelimeler: Aktarım problemi, Tedarik süresi kısıtları, Hazır giyim sektörü. Received: 12.07.2010 Accepted: 31.03.2011 1. INTRODUCTION terms of both the customers and the reduce its costs and improve the level organization on the other (2, 3). of service without increasing the stock Supply chain management is one of level and bearing additional costs (5). the main sources of competitive Supply chain management entails advantage for companies and its effective replenishment and inventory Transshipment problems are variations importance is increasing due to its policies. The use of transshipment of transportation problems in which effects on solving problems faced by points in supply chains renders goods and services are distributed many companies in terms of monitored movement of stocks to between sources, storage points and mismatches between customer intermediary storage locations between destinations. Like in many cases, the demand and supply, which will lead to two echelon levels. Transshipments objective function of transshipment low levels of customer satisfaction and are effective policies for correcting problems is to minimize cost. eventually decreasing sales and discrepancies between demand and Transshipments problems were first market share (1). Logistics is a critical inventory available at specific defined by Orden (6) as an extension part of supply chain management, and locations, serving as a tool for effective of transportation problems with is used to control the flow of materials, management of stocks that are already transshipment points between the services and information taking into procured and delivered into the system sources and the destinations (7). account the cost of these activities on (4). By using transshipments as a tool Transshipment models can be used to one side and the value created in for utilizing stocks, a company can enhance cost efficient movement of 176 TEKSTİL ve KONFEKSİYON 2/2011 goods and improve the level of most of the production is via contract production right after receipt of the customer satisfaction. Dynamic manufacturing. required materials. Upon completion of transshipment problems involving production at the workshop, the order Competition is dense in the textile and inventory decisions have several is shipped via the transportation apparel industry. The main competitors locations, and in each of these company. of the company are its own locations companies have to bear fixed subcontractors, who are willing to sell The company has a depot used as a replenishment, per unit replenishment, their products directly to the transshipment point. The products and per unit holding costs. customers. The company works under manufactured at various Transshipping inventories between the pressure of strict due dates. High subcontracting facilities are supposed locations also includes fixed and per penalty fees apply in case the to be gathered at this depot for final unit costs. The objective in these kind deliveries are untimely. The relationships arrangements and packaging. Different of problems is to determine the with both suppliers and customers play items of personnel uniforms such as replenishment quantities and how key roles in the personnel garments hats, shirts and trousers may be much to transfer in each demand industry, and trust is a key factor in produced by different subcontractors. process to ensure cost minimization. In these relationships. Therefore, conformity The final packaging and labeling the studies by Herer and Tzur (8, 9), to quality standards and deadlines is processes bring these items together. the authors develop optimal and crucial. There are mainly five key However, due to tight due dates of the heuristic algorithms for dynamic players in the transshipment process: customers, and as a result of working transshipment problems incorporating with many subcontractors, the fixed replenishment and transshipment 1. The customer: The source of the company usually has to ship from the costs. A dynamic and deterministic request or order. supplier directly to the customer at the environment is considered, where the last minute. This result stems from transshipments are not used as a tool 2. The company: The decision maker. ineffective planning of the whole for emergency source of supply, but This represents our company, transshipment process. The instead they can be used to offset which receives the order from the transportation cost is considerably high different replenishment and holding customer and outsources the for these last-minute shipments as the costs at different stock locations. production via different suppliers and ateliers. usual modes of transportation cannot In this study, we use integer be used. The decision makers in the programming to solve the transshipment 3. Suppliers/Subcontractors: company wish to use their depot and problem of an apparel company. One Companies that provide raw mate- provide timely deliveries at the same of the core aims of this study is to rials, semi-finished and finished time. ensure that the offered model and the products used in the production The problem is analyzed within the corresponding solution can be used process. context of a transshipment scheme. practically by the company, leading to 4. The workshop: The atelier in which Basic elements of the transshipment more efficient management of the the production activity is outsourced/ problem are the capacity of supply supply chain. In Section 2, we define performed. points, requirements of the demand the problem in detail. Next, we develop points, and the costs associated with the mathematical model in Section 3. 5. The transportation company: The shipping of one unit of product from Numerical results are presented in firm that is responsible for the each supply point to each Section 4. Discussion and conclusion transportation of finished products transshipment point, from each is presented in Section 5. to customers. transshipment point to each demand The process flow of the order point, and from each supply point to 2. PROBLEM DEFINITION fulfillment process is provided in Figure each demand point directly. The We consider a real-life problem faced 1. The process begins with the receipt objective is to minimize the total by an apparel company located in of a customer order. Then, the company transportation cost. We model the Izmir, Turkey. The company currently communicates with its suppliers to problem as a transshipment problem operates in the segment of ready-to- discuss if required materials are with due date restrictions. Unlike wear garments. The company has two already available at stocks or if they typical transshipment models, the due basic branches of operations; namely, should be manufactured. Hence the date of an order is also considered in the casual wear branch and personnel lead time for each order is determined our model since the company faces garments branch. Personnel garments and the order is scheduled for high penalty costs. We present our are manufactured partly in-house, but production. The workshop starts model in the following section. Figure 1. The order fulfillment process. TEKSTİL ve KONFEKSİYON 2/2011 177 3. THE MATHEMATICAL MODEL We define the indices and parameters used in the model as below: s: supplier index t: transshipment
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