TABLE OF CONTENTS Chapter 3 explains how echelons in the upstream transform raw materials, the midstream manufactures finished products, and the downstream fulfills orders with products and services. A skeletal network of trading partners is determined from the requirements of the material flow. Each trading partner buys from at least one other trading partner and sells to at least one other trading partner. This Chapter completes the network design. The design and optimization techniques described here are applicable not only to forward supply chains delivering products and services, but also to reverse supply chains.
Consider a network in which a single trading partner buys from a single supplier and sells to a single customer, see Figure 4-1. The supplier and the trading partner each have starting inventory positions. They have independent inventories of products or components in their respective stocks. The product does not move as long as it remains in stock. The trading partner wants to deliver product to the customer and to replenish components from the supplier.
The customer and the trading partner also each have starting cash positions. They have independent inventories of cash in their respective bank accounts. The cash does not move as long as it remains in the accounts. The trading partner wants to receive a cash payment from the customer for the product and to make a cash payment to the supplier for the components. As the network...
