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Research Details

Dual sourcing and Smoothing under non-stationary demand time series: Re-shoring with SpeedFactories

Abstract

We investigate the emerging trend of near-shoring a small part of the global production to local \emph{SpeedFactories}. The short lead time of the responsive SpeedFactory reduces the risk of making large volumes in advance, yet it does not involve a complete re-shoring of demand. Using a break-even analysis we investigate the lead time, demand, and cost characteristics that make dual sourcing with a SpeedFactory desirable compared to complete off-shoring. We propose order rules that extend the celebrated inventory optimal order-up-to replenishment policy to settings where capacity costs exist and demonstrate their excellent performance. We highlight the significant impact of autocorrelated and non-stationary demand series, which are prevalent in practice yet challenging to analyze, on the economic benefit of re-shoring. Methodologically, we adopt $Z-$transforms and present exact analyses of several discrete-time linear production-inventory models.

Type

Working Paper

Author(s)

Robert Boute, Stephen M Disney, Jan A. Van Mieghem

Date Published

2019

Citations

Boute, Robert, Stephen M Disney, and Jan A. Van Mieghem. 2019. Dual sourcing and Smoothing under non-stationary demand time series: Re-shoring with SpeedFactories.

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