Cost-benefit Analysis of Decentralized Ordering on Multi-tier Supply Chain by Risk Simulator

Masakatsu MORI¹, Ryoji KOBAYASHI², Masaki SAMEJIMA², Norihisa KOMODA²
¹Yokohama Research Laboratory, Hitachi, Ltd.
292, Yoshida-cho, Totsuka-ku, Yokohama, Kanagawa, 244-0817, Japan masakatsu.mori.vr@hitachi.com
²Graduate School of Information Science and Technology, Osaka University
1-5, Yamadaoka, Suita, Osaka, 565-0871, Japan
kobayashi.ryoji@ist.osaka-u.ac.jp, samejima@ist.osaka-u.ac.jp,
komoda@ist.osaka-u.ac.jp

Abstract: For the retailer on supply chain, decentralized ordering to multiple suppliers is an effective method to mitigate the risk that the retailer cannot sell the product to customers when the suppliers are down by catastrophic disasters. But decentralized ordering costs the retailer because the retailer procures products from the suppler whose procurement cost is expensive. For the retailers’ cost-benefit analysis of the decentralized ordering, we address developing the risk simulator on multi-tier supply chain to evaluate the effect of risk mitigation and the cost by decentralized ordering. In order to develop the risk simulator for the multi-tier supply chain, we combine the risk simulator for the 2-tier supply chain as a building block. In addition, when the 2-tier supply chain is combined, the risk simulator calculates propagation of the risk and the cost from a 2-tier supply chain to the others. Applying the risk simulator to the real supply chain with different parameter values, the authors confirmed that the risk simulator enables to find the relationship between the cost-benefit characteristic and the multi-tier supply chain model.

Keywords: cost-benefit analysis, conditional value at risk, decentralized ordering, multi-tier supply chain, risk simulator.

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CITE THIS PAPER AS:
Masakatsu MORI, Ryoji KOBAYASHI, Masaki SAMEJIMA, Norihisa KOMODA, Cost-benefit Analysis of Decentralized Ordering on Multi-tier Supply Chain by Risk Simulator, Studies in Informatics and Control, ISSN 1220-1766, vol. 23 (3), pp. 229-238, 2014. https://doi.org/10.24846/v23i3y201401