Topics: Supply chain, Supply chain management, Manufacturing Pages: 21 (6236 words) Published: June 11, 2013
Production Planning & Control: The Management of Operations
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Development of supplier relationship including cost of defectives in the cyclic production

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Production Planning & Control 2012, 1–10, iFirst

Development of supplier relationship including cost of defectives in the cyclic production Sanjay Sharma*
National Institute of Industrial Engineering (NITIE), Vihar Lake, Mumbai-400087, India (Received in final form 2 February 2012) In the supply chain situation, a decision regarding supplier relationship is of high importance. This usually happens on the basis of supplier company parameters. In order to satisfy the demands, a buyer company often expects the supplier company to expedite their operations, i.e., to enhance the related production rate. In this context, presently the focus of this article is on the cyclic production environment at the supplier company premises. Any practical production process is expected to generate defective products also along with the normal usable products. After an estimation of this and the costs concerning defectives, it needs to be modelled in the cyclic manufacturing. This article incorporates specifically the cost of defectives along with the other relevant costs. After developing an interest in the inclusion of these costs, the supplier company is categorised. A contribution of this article is the development of supplier relationship in the discussed environment. Keywords: scrap; cost of defectives; production time cost; cyclic production; the supplier relationship

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1. Introduction In a supply chain scenario, the management of an interaction between the two companies (i.e. the buyer and the supplier) is of extreme importance. The companies are expected to share certain information among them. Either the supplier forwards the information to the buyer, or the buyer company tries to explore the information from the supplier company/ other sources. In the real-world, often the buyer expects a supplier to expedite their operations (indirectly enhancing their production rate). But in doing so, quality defects usually increase. This situation is analysed in this article with specific inclusion of the cost of defectives. This analysis is found to be useful in the development of supplier relationship. There are usually multiple tiers in a supply chain. Thus a company can play dual role, i.e., it acts as a supplier towards downstream and acts as a buyer towards upstream. To provide a generalised discussion, a clear distinction between buyer and supplier may not be needed at least in the initial stages of this article and a company (in general) may be considered. However, the parameters and analysis may specifically relate to the supplier company at a later stage particularly for the development of supplier relationship, and the strategic insights will be useful to both the buyer and the supplier. Now it will be relevant to consider the...

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