An approach to inter-domain master planning in supply chains

The major task of supply chain master planning (SCMP) is the determination of production and inventory quantities for the whole supply chain on a medium term basis. However, these decisions are commonly distributed among a multiple number of independent companies. Due to the incongruence between incentives of the firms involved in the supply chain and overall supply chain objectives, centralized SCMP will often not be accepted. For this reason the relevant decisions are most commonly coordinated on a decentralized basis. In practice, a specific form of decentralized master planning, so-called upstream planning, can typically be observed. Upstream planning usually leads to a sub-optimal allocation of production, inventory and transportation quantities to the facilities and transportation links of the supply chain. If centralized master planning cannot be realized and the currently employed upstream planning does not yield satisfying results, feasible alternative approaches to supply chain wide master planning should be investigated. In this paper we critically review problems associated with centralized master planning and the shortfalls of upstream planning mechanisms. Thereupon, we suggest a hybrid form of coordination which may help overcome the problems associated with centralized master planning and can also yield a significant potential for improving company specific results. We outline how the benefits associated with a partially centralized approach can be evaluated and how these benefits can be distributed among the partners involved.