Order release strategies to control outsourced operations in a supply chain
International Journal of Production Economics
We consider the situation where an OEM (Original Equipment Manufacturer) outsources some of its production activities to a contract manufacturer who serves more customers on the same capacitated production line. Further, the contract manufacturer is not willing to share all relevant information with the OEM, and therefore, a complex situation arises for the OEM to control the outsourced operations properly. In this paper, we propose and compare three different order release strategies to plan
... d control outsourced operations in a supply chain where the contract manufacturer is producing different variants of a certain product. The order release strategies differ in the number of decision levels in the order release system, which are organized in a hierarchical way such that the output ofeach decision level forms a constraint for the lower decision level. We notice that the order release system with one decision level is commonly used in practice. A simulation study is performed to compare the performance ofthe different order release strategies such that the probabilistic behaviour of the contract manufacturer is (partly) incorporated and production plans are generated based on (deterministic) mathematical programming models. The results show that the order release system with multiple decision levels performs significantly better than the order release system with only one decision level. Finally, some ideas for future research are discussed.