An integrated approach of sustainable procurement and procurement postponement for the multi-product, assemble-to-order (ATO) production system

Mukherjee, Krishnendu

doi:10.1590/0103-6513.191915

Krishnendu Mukherjee ^* * gopal.mech2010@gmail.com

Mechanical Engineering Department, University of Engineering & Management, Jaipur, Índia

* gopal.mech2010@gmail.com

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Figure 1
The proposed 2-stage supply chain model for sustainable ATO. Source: Elaborated by the author.

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Figure 2
The bill of material. Source: Elaborated by the author.

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Figure 3
The AHP model of supplier selection for the base product. Source: Elaborated by the author.

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Figure 4
The AHP model of supplier selection for the auxiliary parts/sub-assembly. Source: Elaborated by the author.

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Figure 5
IFN values for supplier’s reliability factors. Source: Elaborated by the author.

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Figure 6
Order allocation at different value of alpha. Source: Elaborated by the author.

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Table 1
Classification of postponement strategy.

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Table 2
Supplier data sheet.

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Table 3
Linguistic terms.

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Table 4
Supplier’s Reliability measurement data sheet.

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Table 5
Freight transmission emission factor (Department of Energy and Climate Change, 2009Department of Energy and Climate Change. (2009). Guidelines to Defra/DECC’s GHG conversion factors for company reporting: methodology paper for emission factors. London: DECC.).

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Table 6
Inbound logistics cost (Freight Operations Information System, 2012Freight Operations Information System. (2012). Retrieved in 01 January, 2015, from https://www.fois.indianrail.gov.in/FoisWebsite/html/Freight_Rates.htm
https://www.fois.indianrail.gov.in/FoisW... ).

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Table 7
Cost-Emission-Decision Matrix per unit tonne of transport.

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Table 8
Linguistic terms.

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Table 9
Local Supplier Performance Matrix.

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Table 10
Supplier’s data sheet for auxiliary product.

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Table 11
Demand of products at retailer’s site.

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Sl.No.	Type	Definition	Application
1	Pull postponement	It is also known as process postponement (Brown et al., 2000Brown, A. O., Lee, H. L., & Petrakian, R. (2000). Xilinx improves its semiconductor supply chain using product and process postponement. Interfaces, 30(4), 65-80.),which refers to moving the decoupling point earlier in the supply chain such that fewer steps will be performed under forecast results (Lee, 1998Lee, H. L. (1998). Postponement for mass customization: satisfying customer demands for tailor-made products. In J. Gattorna (Ed.), Strategic Supply Chain Alignment. Surrey: Gower.).	1. ABC Bicycle Company, India. 2. Benetton, an apparel manufacturer, postpones its colour dyeing process until orders are received (Lee & Tang, 1998Lee, H. L., & Tang, C. S. (1998). Variability reduction through operations reversal. Management Science, 44(2), 162-172.).
2	Logistics postponement	Logistics postponement involves the re-designing of some of the processes in the supply chain so that some customization can be performed downstream closer to customers (Lee, 1998Lee, H. L. (1998). Postponement for mass customization: satisfying customer demands for tailor-made products. In J. Gattorna (Ed.), Strategic Supply Chain Alignment. Surrey: Gower.). Packaging postponement and labelling postponement (Twede et al., 2000Twede, D., Clarke, R. H., & Tait, J. A. (2000). Packaging postponement: a global packaging strategy. Packaging Technology and Science, 13(3), 105-115.) or branding postponement (Ackerman, 1997Ackerman, K. B. (1997). Postponement: practical handbook of warehousing. 4th ed. New York: Chapman and Hall.) can be subsets of logistics postponement when the packaging, labelling or branding processes are moved closer to customers.	1. Hewlett-Packard produces generic printers at its factory and distributes them to the local distribution centres, where power plugs with appropriate voltage and user manuals in the right language are packed. Since generic printers are lighter, more units could be shipped. 2. All products in IKEA retail stores are kept in semi-finished forms (flat packs) and are assembled after home delivery by customers or deliverymen. In this way, truckload capacities can be utilized and configurations can easily be made at customer locations.
3	Form postponement	Form postponement, also called product postponement (Brown et al., 2000Brown, A. O., Lee, H. L., & Petrakian, R. (2000). Xilinx improves its semiconductor supply chain using product and process postponement. Interfaces, 30(4), 65-80.), gives fundamental change of the product structure by using standardized components and processes to achieve high customization (Lee, 1998Lee, H. L. (1998). Postponement for mass customization: satisfying customer demands for tailor-made products. In J. Gattorna (Ed.), Strategic Supply Chain Alignment. Surrey: Gower.; Brown et al., 2000Brown, A. O., Lee, H. L., & Petrakian, R. (2000). Xilinx improves its semiconductor supply chain using product and process postponement. Interfaces, 30(4), 65-80.).	1. Brown et al. (2000)Brown, A. O., Lee, H. L., & Petrakian, R. (2000). Xilinx improves its semiconductor supply chain using product and process postponement. Interfaces, 30(4), 65-80. applied the form postponement in a semiconductor company (Xilinx), where it re-designs the IC so that it could be re-configured by software easily and quickly for customized features and functions.
4	Price postponement	Van Mieghem & Dada (1999)Van Mieghem, J. A., & Dada, M. (1999). Price versus production postponement: capacity and competition. Management Science, 45(12), 1631-1649. defined price postponement from economic and marketing perspectives. They described the price postponement as a strategy aimed at deferring the pricing decision until customer demand is known. Selling price is negotiated with customers after they place their orders.	1. In July 2002, Bank of China (BOC) in Hong Kong applied a price postponement strategy for its initial public offering.
5	Time postponement	Customer order triggers the forward movement of goods.	1.Dell usually assembles computer after the orders are placed by customers
6	Place postponement	Keep the goods in the central location of the supply chain until the customer orders are arrived.	Hindustan Unilever Limited, India’s largest consumer product company, addresses three major market segments: modern trade segment (organized retail sector), general trade segment and rural markets. The modern trade segments, consists of large urban market, are usually serviced by a HUL warehouse that supplies to the cluster of retail locations.

Name	Cost (INR)		Ordering Cost (INR/tonne)		Capacity (Tonne)		% late delivery	Distance (Km)	Mode of Transport
Name	Prod A	Prod B	Prod A	Prod B	Prod A	Prod B	% late delivery	Distance (Km)	Mode of Transport
Supp. 1	100	150	2000	3000	1000	2000	0.2	190	1. By HGV 2. 100 Km by rail and 90 Km by HGV
Supp. 2	102	149	2000	3000	1000	1500	0.15	200	1. By Large container
Supp. 3	101	150	2000	3000	1000	1500	0.2	180	1. By HGV
Supp. 4	100	151	2000	3000	1000	1500	0.15	200	1.160 Km by rail and 40 Km by HGV. 2. By HGV
Supp. 5	103	152	2000	3000	1000	1500	0.1	240	1.200 Km by rail and 40 Km by HGV.
Supp. 6	102	150	2000	3000	1000	2000	0.2	240	1. By HGV 2.200 Km by rail and 40 Km by HGV.

Linguistics terms	IFNs	Linguistics terms	IFNs	Linguistics terms	IFNs
Excellent	[1.00;0.00;0.00]	Good	[0.7;0.2;0.1]	Bad	[0.4;0.5;0.1]
Very good	[0.85;0.05;0.1]	Moderate	[0.5;0.5;0.00]	Very bad	[0.25;0.6;0.15]
				Extremely bad	[0.0;0.9;0.1]

Name	Technical Qualification of workers	Supplier’s Quality System	Past supply of similar raw material
Supplier1	Good	Good	Good
Supplier2	Moderate	Good	Good
Supplier3	Bad	Moderate	Bad
Supplier4	Moderate	Good	Good
Supplier5	Excellent	Excellent	Excellent
Supplier6	Good	Excellent	Very good

Mode	Road LGV	HGV	Rail	Small tanker	Large container
g/tonne-km	400.1	118.6	28.3	20	13

Mode	Transportation Charges (INR/tone-Km)	Mode	Distance (Km)		Approx. Transportation Charges (INR/tonne-Km)
Mode	Transportation Charges (INR/tone-Km)	Mode	From	To	Approx. Transportation Charges (INR/tonne-Km)
By road	200	By rail Train load LR4 Wagon load 120	1	100	120
			101	125	142
			126	150	165
			151	175	185
			176	200	207

Name	Mode of transport	Cost (INR)	Emission (g)	Decision
Supplier 1	Option1: By HGV	38000	22534	Option 2 is preferred for low cost and low emission.
Supplier 1	Option 2: 100 Km by rail and 90 Km by HGV	30000	13504	Option 2 is preferred for low cost and low emission.
Supplier 2	Option 1: By Large container	40000	2600	Option 1 is selected.
Supplier 2	Option 2: None	---------	---------	Option 1 is selected.
Supplier 3	Option 1: By HGV	36000	21348	Option 1 is selected.
Supplier 3	Option 2: None	----------	---------	Option 1 is selected.
Supplier 4	Option 1: 160 Km by rail and 40 Km by HGV.	37600	9272	Option 1 is preferred for low cost and low emission
Supplier 4	Option 2: By HGV	40000	23720	Option 1 is preferred for low cost and low emission
Supplier 5	Option 1: 200 Km by rail and 40 Km by HGV.	49400	10404	Option 1 is selected.
Supplier 5	Option2: None	-------	---------	Option 1 is selected.
Supplier 6	Option 1:By HGV	48000	23720	Option 2 gives 1.03 times higher cost and 2.28 times lower emission than option 1. Assuming equal priority to cost and emission. Hence, option 2 is preferred.
Supplier 6	Option 2: 200 Km by rail and 40 Km by HGV.	49400	10400

Linguistic Terms	IFNs
Very Costly	[1.00;0.00;0.00]
Costly	[0.75;0.15;0.1]
Cheap	[0.6;0.3;0.1]
Very Cheap	[0.5;0.3;0.2]

Name	Price	Quality	Service	Flexibility	Technical Capability
Supplier 1	Very Costly	Very good	Good	Very Good	Excellent
Supplier 2	Cheap	Good	Moderate	Good	Moderate
Supplier 3	Cheap	Good	Moderate	Moderate	Moderate

Name	Cost (INR)		Ordering Cost (INR/piece)		Capacity (piece)		% late delivery	Reliability	IFS priority value
Name	Prod A	Prod B	Prod A	Prod B	Prod A	Prod B	% late delivery	Reliability	IFS priority value
Supplier 1	200	350	200	300	1000	2000	0.2	0.65	0.091825
Supplier 2	202	349	200	300	1000	1500	0.15	0.68	0.232825
Supplier 3	201	350	200	300	1000	1500	0.2	0.69	0.6751

Product Type	µ_J (unit)	σ_J (unit)	α	Φ^–1(α)
Product A	2500	1000	0.85	1.0364
Product B	2400	1200	0.85	1.034

\sum_{i = 1}^{n} \sum_{j = 1}^{m} C_{i j} X_{i j} + \sum_{i = 1}^{n} \sum_{j = 1}^{m} T C_{i j} X_{i j} + \sum_{j = 1}^{m} H_{j} \sum_{i = 1}^{n} X_{i} + \sum_{i = 1}^{n} \sum_{j = 1}^{m} C_{O i j} X_{i j}

[1] * gopal.mech2010@gmail.com

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An integrated approach of sustainable procurement and procurement postponement for the multi-product, assemble-to-order (ATO) production system

Abstract