Impact of aggregating supplies from single supplier to a cluster of producers: opportunities for 3PL service providers

A supply chain is a network of different entities, such as suppliers, manufacturers, distributors and retailers. Each supply chain member adopts a myopic policy for replenishment and production‐related decisions to maximise its revenue or minimise its costs. It results in local optimisation and hence reduced overall supply chain performance. This work investigates the benefits of coordinating the production and distribution decisions in a scenario comprising single supplier and a cluster of multiple buyers. The problem is modelled as a mixed‐integer linear programme. Factor analysis is conducted to identify dominant factors that favour the benefits of coordination. A heuristic procedure is developed to solve large problem instances in very less computational time. Encouraging results are obtained.