Single Source-single Destination Coordination Chapter-2 Single Source-single Destination Coordination

Supply chains (SC) are generally complex and are characterized by numerous activities spread over multiple functions and organizations, which pose interesting challenges for effective SC coordination. To meet these challenges, SC members must work towards a unified system and coordinate with each other. Importance of coordination in SC has escalated many folds. SC coordination requires that each stage take into account the effects of its actions on the other stages. Lack of coordination results when objectives of different stages conflict or information moving between stages is distorted. As a part of SCM literature and practice, it has long been recognised that there can be significant gains in integrating procurement and transportation decisions. Many companies rely on the third party carrier for transportation of goods from supply location to retail or consumption point. Freight rate discounts depending on shipment size has become a common practice, [Carter and Ferrin (1996)]. The freight costs are usually in the form of discounts tariffs in the quantity, which reflects economies of scale. The quantity to order at a given time must be determined by balancing two factors: 1) the cost of possessing or carrying materials 2) the cost of acquiring or ordering materials. Purchasing larger quantities may decrease the unit cost of acquisition, but this saving may not be more than offset by the cost of carrying materials in stock for a longer period of time.1