Modeling and Optimization of Supply Chain Product Rollover Strategies

Nazmy, Jana; Taha, Raghda Bahaa; El-Kharbotly, Amin Kamel

doi:10.21608/pserj.2022.163701.1195

Modeling and Optimization of Supply Chain Product Rollover Strategies

Document Type : Original Article

Authors

¹ Mars Wrigley Egypt

² Department of Supply Chain Management College of International Transport and Logistics, Arab Academy for Science, Technology and Maritime Transport, Egypt

³ Design and Production Engineering, Faculty of Engineering Ain Shams University Cairo, Egypt

10.21608/pserj.2022.163701.1195

Abstract

Manufacturing companies operate in a fast-paced environment and accordingly, they must continuously respond to customers’ requirements for improved and innovative products. The present research studies the application of solo and dual product rollover strategies in a supply chain that consists of manufacturers and distributors, with the focus on the production rollover strategies at the manufacturers echelon. A MILP model is developed for a multi-product multi-echelon multi-period supply chain with the objective of maximizing profit during period where the demand of the new product is replacing that of the old product through optimizing the sales, production, and inventory quantities, as well as the timing of the transition from the old to the new products in production and sales. The developed model considers the effect of demand, manufacturing capacity, inventory holing cost, selling prices, the opportunity cost of the lost sales, as well as the firm’s choice of the production rollover strategy. The paper presents the results of a numerical example while considering a case of insufficient capacity and shows that dual production rollover strategy gives better results of total profit and average fill rate than the solo production rollover strategy. Finally, the study includes a sensitivity analysis carried out on the numerical example, from which it was found that the optimal solution for solo production rollover strategy is more sensitive than that of the dual strategy to the increase of the opportunity cost of lost sales as well as the increase in price ratio between the new and old products.

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