1、size and delivery lot size at the minimum total cost. Finally, a Taiwaneseoptical drive manufacturer is used as an illustrative case study to demonstrate the feasibility and rationality of the model.1. IntroductionWith the globalization of businesses, the on-time delivery of products throughthe supp
2、ort of a logistics system has become more and more important. Globalcorporations must constantly investigate their production systems, distributionsystems, and logistics strategies to provide the best customer service at the lowest possible cost.Goetschalckx, Vidal, and Dogan (2002) stated that long
3、-range survival forinternational corporations will be very difficult without a highly optimized,strategic, and tactical global logistics plan. Stadtler (2005) mentions thatthe activities and processes should be coordinated along a supply chain tocapture decisions in procurement, transportation, prod
4、uction and distributionadequately, and many applications of supply chain management can be found inthe literature (e.g. Ha and Krishnan, 2008, Li and Kuo, 2008 and Wang and Sang, 2005).Recently, the study of the Just-In-Time (JIT) system under a global environmenthas attracted more attention in the
5、Personal Computer (PC) related industriesbecause of the tendency towards vertical disintegration. The JIT system can beimplemented to achieve numerous goals such as cost reduction, lead-timereduction, quality assurance, and respect for humanity (Monden, 2002). Owing tothe short product life cycle of
6、 the personal computer industry, downstreamcompanies usually ask their upstream suppliers to execute the JIT system, sothat the benefits, like the risk reduction of price loss incurred frominventory, lead times reduction, on-time delivery, delivery reliability,quality improvement, and lowered cost c
7、ould be obtained (Shin, Collier, &Wilson, 2000). According to the JIT policy, the manufacturer must deliver theright amount of components, at the right time, and to the right place (Kim &Kim, 2002). The downstream assembler usually asks for higher delivery frequencyand smaller delivery lot sizes so
8、as to reduce his inventory cost in the JITsystem (Kelle, khateeb, & Miller, 2003). However, large volume products areconveyed using sea transportation, using larger delivery lot sizes to reducetransportation cost during transnational transportation. In these circumstances,corporations often choose s
9、pecialized service providers to outsource theirlogistics activities for productivity achievement and/or service enhancements(La Londe & Maltz, 1992). The collaboration of third party logistics (3PL)which is globally connected to the upstream manufacturer and the downstreamassembler will be a feasibl
10、e alternative when the products have to be deliveredto the downstream assembler through the JIT system. In this study, theinteraction between the manufacturer and the 3PL will be discussed to figureout the related decisions such as the optimal production lot size of themanufacturer and the delivery
11、lot size from the manufacturer to the 3PL, basedon its contribution towards obtaining the minimum total cost. In addition, therelated assumptions and restrictions are deliberated as well so that theproposed model is implemented successfully. Finally, a Taiwanese PC-relatedcompany which practices the
12、 JIT system under a global environment is used toillustrate the optimal production lot size and delivery lot size of the proposed cost model.2. Literature reviewThe globalization of the network economy has resulted in a whole newperspective of the traditional JIT system with the fixed quantity-perio
13、ddelivery policy (Khan & Sarker, 2002). The fixed quantity-period deliverypolicy with smaller quantities and shorter periods is suitable to be executedamong those companies that are close to each other. However, it would be hardfor the manufacturer to implement the JIT system under a global environm
14、ent,especially when its products are conveyed by transnational sea transportationglobally. Therefore, many corporations are trying to outsource their globallogistics activities strategically in order to obtain the numerous benefitssuch as cost reduction and service improvement. Hertz and Alfredsson
15、(2003)have stated that the 3PL, which involves a firm acting as a middleman nottaking title to the products, but to whom logistics activities are outsourced,has been playing a very important role in the global distribution network. Wangand Sang (2005) also mention that a 3PL firm is a professional l
16、ogisticscompany profiting by taking charge of a part or the total logistics in thesupply chain of a focal enterprise. 3PL also connects the suppliers,manufacturers, and the distributors in supply chains and provide substance movement andlogistics information flow. The core competitive advantage of a
17、 3PL firm comesfrom its ability to integrate services to help its customers optimize theirlogistics management strategies, build up and operate their logistics systems, and even manage their whole distribution systems (Wang & Sang, 2005).Zimmer (2001) states that production depends deeply on the on-
18、time delivery ofcomponents, which can drastically reduce buffer inventories, when JITpurchasing is implemented. When the manufacturer has to comply with theassembler under the JIT system, the inventories of the manufacturer will beincreased to offset the reduction of the assemblers inventories (Davi
19、d and Chaime, 2003, Khan and Sarker, 2002 and Sarker and Parija, 1996).The Economic Order Quantity (EOQ) model is widely used to calculate the optimallot size to reduce the total cost, which is composed of ordering cost, setupcost, and inventory holding cost for raw materials and manufactured produc
20、ts(David and Chaime, 2003, Kelle et al., 2003, Khan and Sarker, 2002 and Sarkerand Parija, 1996). However, some issues such as the integration ofcollaborative 3PL and the restrictions on the delivery lot size by seatransportation are not discussed further in their studies. For the aboveinvolved cost
21、s, David and Chaime (2003) further discuss a vendorbuyerrelationship to include two-sided transportation costs in the JIT system.Koulamas, 1995 and Otake et al., 1999 describe that the annual setup cost isequal to the individual setup cost times the total number of orders in a year.McCann, 1996 and
22、Tyworth and Zeng, 1998 both state that the transportation costcan be affected by freight rate, annual demand, and the products weight.Compared to the above studies which assume that the transportation rate isconstant per unit, Swenseth and Godfrey (2002) assumed that the transportationrate is consta
23、nt per shipment, which will result in economies of scale fortransportation. Besides, McCann (1996) presented that the total logistics costsare the sum of ordering costs, holding costs, and transportation costs. ASyarif, Yun, and Gen (2002) mention that the cost incurred from a distributioncenter inc
24、ludes transportation cost and operation cost. Taniguchi, Noritake,Yamada, and Izumitani (1999) states that the costs of pickup/delivery and land-haul trucks should be included in the cost of the distribution center as well.The numerous costs involved will be formulated in different ways when themanu
25、facturer operates the JIT system associated with a collaborative 3PL undera global environment. Kreng and Wang (2005) presented a cost model, which canbe implemented in the JIT system under a global environment, to investigate themost appropriate mode of product delivery strategy. They discussed the
26、adaptability of different transportation means for different kinds of products.In this study, the implementation of sea transportation from the manufacturerto the 3PL provider will be particularized, and the corresponding cost modelwill also be presented to obtain the minimum total cost, the optimal
27、 productionlot size, and the optimal delivery lot size from the manufacturer to the 3PLprovider. Finally, a Taiwanese company is used for the case study to illustrate and explore the feasibility of the model.3. The formulation of a JIT cost model associated with the 3PLBefore developing the JIT cost
28、 model, the symbols and notations used throughout this study are defined below:BCj3PLs pickup cost per unit product (amount per unit)3PLs cost of the jth transportation container type, where j = 1, 2,3,n (amount per year)DP annual demand rate of the product (units per year)DrDannual demand of raw ma
29、terials (units per year)customers demand at a specific interval (units per shipment)EFannual inventory holding cost of 3PL (amount per year)transportation cost of the jth transportation container type from themanufacturer to the 3PL, where j = 1, 2, 3, , n (amount per lot)freight rate from the 3PL provider to the assembler (amount per kilogram)Hp inventory holding cost of a unit of the product (amount per
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