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How RHF contracts alter demand information

Walsh P. M., Williams P. A., Heavey C.

Systems Science

2007

Vol. 33, no 1

61-79

A discrete-event simulation model of a supply chain has been developed to evaluate operational performance of sharing uncertain information on upcoming demand between an Original Equipment Manufacturer (OEM) and a Contract Manufacturer (CM) under a formal Rolling Horizon Flexibility (RHF) contract in a four node supply chain. There are two types of RHF contracts evaluated, that is, RHF contract with constant flexibility and decreasing flexibility bounds. The demand is externalised (that is, the OEM receives the demand), stochastic and is generated according to the gamma distribution. This paper reports on analysis of RHF contracts operating with coefficients of variation (CV) of demand up to 2.00 while comparing the supply chain performances with a no contract situation. Analysis on the way RHF contracts alter the demand information transferred between a buyer (OEM) and supplier (CM) are show here.