European Journal of Operational Research 162 (2005) 153172

www.elsevier.com/locate/dsw

An assembly-type supply chain system controlled

by kanbans under a just-in-time delivery policy
Shaojun Wang
b

a,1

, Bhaba R. Sarker

b,*

a
Department of Industrial and Engineering Technology, Southeast Missouri State University, Cape Girardeau, MO 63701, USA
Department of Industrial and Manufacturing Systems Engineering, Louisiana State University, Baton Rouge, LA 70803-6409, USA

Received 1 November 2001; accepted 14 October 2003

Available online 31 January 2004

Abstract
This research studies the assembly-type supply chain system controlled by kanban mechanism. First, a supply chain
system is modeled as a mixed-integer nonlinear programming (MINLP) problem. A composite formulation of the
assembly-type supply chain system is developed by appropriately aggregating the individual branch models as a whole
system. The batch size, the number of batches, and the total quantity over one period in the mainline and each branch
line are determined. The small size MINLP problems are solved optimally by a branch-and-bound method. For the
large size MINLP problems, a heuristic is developed which divides the ATSCS into several small size problems, and
then conquers them individually. Next, the kanban operation between two adjacent plants is developed to schedule the
loading and unloading, and transportation. Coupled with plant-wide eorts for cost control and management commitment, a logistics system is built for controlling the production as well as the supply chain system, which results in
minimizing the total cost of the supply chain system. Numerical examples are presented to illustrate the two heuristic
procedures and a better solution is obtained for the ATSCS problem.
2003 Elsevier B.V. All rights reserved.
Keywords: Kanban; Supply chain; Inventory control; Mixed integer nonlinear programming

1. Introduction
The primary component of supply chain (SC) system consists of manufacturers, wholesalers, and
retailers. The manufacturers are usually composed of a series of plants (or shops, or, workstations). The
manufacturing facility may be located at the same city, or at dierent cities or in dierent states. Thus, there
may be signicant material ows (the work-in-process formed by the semi-products) between two consecutive manufacturing facilities (workstations, shops, plants). The reference points of the kanban travel, in
this research, are assumed as plants. So these plants or the reference points of kanban travel, in general,
*

Corresponding author. Tel.: +1-225-578-5370; fax: +1-225-578-5109.

E-mail addresses: swang@semo.edu (S. Wang), bsarker@lsu.edu (B.R. Sarker).
Tel.: +573-651-2650; fax: +573-986-6174.

0377-2217/$ - see front matter 2003 Elsevier B.V. All rights reserved.
doi:10.1016/j.ejor.2003.10.038

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

could be companies, plants, workshops, workstations, or machines, depending on the context. Also,
kanban can be considered as an AGV (Automated Guided Vehicle), cart, tote, truck, ship, train, etc,
depending on the situations.
A supply chain system operating with excess inventory is not eective as the excess inventory denotes
poor planning, poor purchasing practices, poor communication and insucient quality levels. In order to
remain competitive and experience economic success, every organization has focused on increasing productivity, improving the quality of its products and raising the standards of eciency within its company.
The improvements in reduction of inventory, wasted labor and customer service are usually accomplished
through kanban operations.
The material ow and information ow between two adjacent plants form a kanban stage. If a supply
chain system consists of only two plants, it is called single-stage supply chain system (SSSCS). If it consists
more than two plants, and they are in series, it is called multi-stage supply chain system (MSSCS). If it
consists of more than two plants, and they form an assembly tree, it is called assembly type supply chain
system (ATSCS).
This research aims at increasing the degree of eciency within the production processes and reducing the
level of inventory and wasted materials, time, and eort involved in each production stage. The objective is
to build a logistics system for a general supply chain system, the ATSCS, controlled by kanban technique.
For the SC, the number of kanbans, the batch size and the number of batches in each stage that is to be
shipped by kanbans, and the total quantity over one period are to be determined optimally. The kanban
operation at each stage is to be congured based on the optimal results of the model. Eciently controlling
the production and reducing the WIP will be the eort of outcome of the SC, which leads to minimize the
total cost of SC.
The kanban technique has attracted many researchers since it was rst brought to light in early 1980s.
The methodologies for computing the required number of kanbans range from the simple classical economic-order-quantity (EOQ) models to complex nonlinear programming models, queue theoretic models,
and dynamic programming models. A literature review on just-in-time (JIT) manufacturing systems and
kanban operations can be found in Akturk and Erhun (1999) and Price et al. (1994). The former paper
classied the techniques of kanbans and provided both the design parameters and kanban sequences for a
JIT manufacturing system. The latter presented the review of optimization models that determine the
number of kanban cards at each workstation and the size of kanban lots.
Tardif and Maaseidvaag (2001) introduced an adaptive kanban-type pull control mechanism to determine release or reorder time for raw parts for the case of a single-stage, single-product kanban system where
the demands occur according to a Poisson process and processing times are exponential random variables.
Herer and Shaolom (2000) simulated the use of a nonintegral number of kanban cards in the production
system to look at how one can predict the performance of such a system. Gupta and Al-Turki (1997)
introduced a methodology to manipulate the number of kanbans in a JIT system. For optimizing the
number of kanbans, Sarker and Balan (1996, 1998, 1999) and Nori and Sarker (1996, 1998) determined the
number of kanbans between two workstations for both single-stage and multi-stage kanban systems. Parija
and Sarker (1999) analyzed a supply chain system by determining the raw material ordering policy and
nished goods delivering policy. Altiok and Ranjan (1995) considered a productioninventory system
consisting of multiple stages in series with arbitrary processing times and with intermediate buer inventories. Once the inventory level drops to its reorder level r, the stage undergoes a set-up and production
resumes.
Hemamalini and Rajendran (2000) considered a kanban-controlled owshop and present recursive
equations for timetabling of containers in a given sequence. In their model, production kanbans control the
loading of containers on machines or workstations and withdrawal kanbans regulate the movements of
containers between two consecutive buers. Rajendran (1999) also formulated a heuristic for scheduling in
a kanban owshop. Axsater and Rosling (1999) considered the multi-stage productioninventory control

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

155

policies with lot sizing. Mascolo et al. (1996) developed a general-purpose analytical method for performance evaluation of multi-stage kanban controlled production systems. Other works that addressed the
related issues are Karmarkar and Kekre (1989), and Horng and Cochran (2001).
Most researchers addressed two major issues of kanban controlled supply chain systems: design and
operation. The design issue determines the number of kanbans for the JIT manufacturing, and the operation issue devises the schedule of kanban circulation. In this research, both design and operation issues of
kanban control are considered and the complicated tree type SC is systematically discussed.

2. Dierent supply chain systems

Three dierent types of supply chain systems, SSSCSC, MSSCS and ATSCS have been dened previously. Here we elaborate on their structure and operational perspectives. The ATSCS can be decomposed
into many SSSCSs and MSSCSs the aggregation of which actually forms the ATSCS. More specically, an
ATSCS can be considered as an assembly line (main supply line) and several feeding lines (branches of
lateral supply lines) that form the branches (of SSSCSs or MSSCSs) of a tree. To describe it clearly, the
SSSCS and MSSCS have to be introduced rst. Detailed descriptions are given in Wang (2001).
2.1. Single-stage supply chain systems (SSSCS) and the kanban mechanism
In a single-stage supply chain system as shown in Fig. 1, there are two plants that form a SSSCS. The
raw material is replenished at the plant 1 from suppliers. The semi-nished products are transported to
plant 2 by means of containers to which kanbans are attached, and these are indicated by blocks in the
gure with blank for empty kanban and the hatched for loaded kanban. The semi-nished products are
then processed at plant 2 to produce nished products.
In this kanban stage, rst, a withdrawal kanban attached to a loaded container in a succeeding plant is
detached from the container and put into the kanban post (WK) when the rst part from the container is to
be used. Second, the withdrawal kanbans in the post are collected at a xed or nonxed interval of time and
brought to the preceding plant by the transportation vehicle. The withdrawal kanban indicates such
information as the quantity of parts to be lled in a container, the preceding and succeeding plants involved
with the part, the collection interval, etc. The withdrawal kanban is then attached to the container in a store
at the preceding plant in place of the production ordering kanban (PK) permitting the worker at the

Fig. 1. A single-stage kanban supply chain system.

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

preceding plant to produce the required amount of parts; that is, the detached production-ordering kanban
triggers the production at the preceding plant. The containers lled with parts together with the withdrawal
kanban are brought, in turn, to the succeeding plant by a vehicle. This kanban cycle realizes smooth, timely,
and wasteless ow between preceding and succeeding plants.
2.2. Multi-stage supply chain systems (MSSCS)
An N -stage supply chain system operated with kanbans is presented in Fig. 2. When demand occurs at
the last plant N , the production-ordering kanban is detached from the kanban post PK in that plant and is
sent to the kanban post WK in front of the plant. At that time, this production-ordering kanban is changed
by the withdrawal kanban that is attached to the container waiting there. Then, the detached productionordering kanban triggers the production of parts at this plant. These actions are pulled throughout the
manufacturing system started from the plant N until it reaches plant 1.
The production-ordering kanbans at a plant control the production at that plant. The withdrawal
kanbans at a plant control the movements of containers between two plants. If there are no withdrawal
kanbans in the preceding plant, then full containers are not allowed to be transferred to the succeeding
plant. Because of the variability of production condition, sometimes, the intermediate plants may be either
blocked or starved.
2.3. Assembly-type supply chain system (ATSCS)
A conguration of a supply chain system shown in Fig. 3 forms a typical ATSCS. The dotted lines
indicate the kanban information ows and the solid lines indicate the material ows. The instances of the
ATSCS can be found in many industries dealing with material ows. For example, in manufacturing a sixcylinder engine of a car, the engine body is the mainline. The crank, cylinder, valve, crankshaft etc are all
manufactured in their branch (feeding) lines that could be within the same or another location. When
assembling the engine, it needs six cranks, twelve valves, and one crankshaft. The instance can be bigger.
For example, if one automobile company makes a car, the engine may be manufactured in city A, the
chases may be provided from city B, the body comes from city C, and so on.
In the system shown in Fig. 3, there are twelve plants and three branches. The plants are represented here
as nodes and the assembly points are where the branch merges.
The mainline of the ATSCS shown in Fig. 3 is a MSSCS with plants S1, S2,. . .,S6. A SSSCS branch,
formed by S7 and S8, rst merge into the mainline by joining the line at the plant S2 (or node 1). Similarly,
a two-stage supply chain system, which is a branch with S9, S10 and S11, joins the mainline at plant S3 (or

Fig. 2. Multi-stage supply chain system operated with kanbans.

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172
Raw
Material

S9

S10

Raw
Material

S7

S8

157

S11

S12
Raw
Material

S1

S2

Node 1

S3

Node 2

S4

S5

S6

Finished
Goods

Node 3

Fig. 3. Assembly-type supply chain system operated with kanbans.

node 2), and a single plant which is also a branch joins at plant S6 (or node 3). In this way, all 12 plants for
an aggregated ATSCS as shown in Fig. 3.

3. Supply chain models

The logical characteristics of the ATSCS problem require that the solutions will be obtained in two
procedures. First, a mathematical model, the basic inventory model, is built by dividing the SC into several
SSSCSs and MSSCSs. From the model, the batch size, the number of batches, and the total quantity of
products to be produced in each stage over one period in each branch line and in the mainline, are obtained.
Next, the materials set in batches are transported by kanbans. Therefore, the number of kanbans to deliver
the batches needs to be determined with loading/unloading time of containers, the transport time between
two adjacent plants. Finally, the kanban circulation will be scheduled. All these problems are solved based
on the objective of minimizing the total cost of the supply chain.
Notation
Index i
Parameters pi , D, c, Li , Hr , Hwi , Hf , Ar , Asi , Awi , Af , It, Iavg , Tui , Tdi , Cr , Cwi , Cf , TC.
Variables Q, Qr , Qw , Qf , Ki , Ko , mi , Kf , s.
Denitions
i
an index for plant, i 1; 2; . . . ; N 1; or an index for kanban stage, i 1; 2; . . . ; N , normally
kanban stage is between plant i and i 1
Af
setup (shipping) cost at last plant, dollars/setup (shipment)
Ar
setup (ordering) cost of raw material inventory, dollars/setup (order)
Asi
setup (manufacturing) cost at stage i, dollars/batch
Awi
setup (shipping) cost at stage i, dollars/ship (setup)
c
cost of an item, dollars/unit
D
the demand rate, units/year
Hf
holding cost of nished goods inventory, dollars/unit/year
Hr
holding cost of raw material inventory, dollars/unit/year
Hwi
holding cost of work-in-process inventory at stage i, dollars/unit/year

158

It
Iavg
K
Ko
Ki
Kf
Li
m
mi
pi
Q
Qf
Qr
Qwi
T
Tui
Tdi
TC
Cf
Cr
Cwi
s

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

inventory level, units

average inventory, units
number of shipments in single-stage model
number of order of raw material inventory placed
number of shipments at the stage i
number of shipments placed at the nal plant (nished goods)
time between successive shipments at stage i
number of shipments placed during the production uptime in a single-stage model
number of shipments placed during the production uptime at stage i
production rate of plant ii 1; 2; . . . ; N 1, units/year
total quantity of nished goods produced over a period T , units/year
nished goods shipping quantity, units/shipment
order quantity of raw material inventory, units/order
intermediate stage shipping quantity, units/shipment
cycle time, years
uptime of plant i, years
downtime of plant i, years
total cost of a supply chain system, dollars/year
cost of nished goods inventory, dollars/year
cost of raw material inventory, dollars/year
cost of work-in-process inventory at the stage i, dollars/year
number of shipments placed during the uptime of the nal plant

In the ATSCS, the total cost for the system includes the costs of all branch lines and the cost of mainline.
The branch line or the mainline is either a SSSCS or a MSSCS. The models for all three types of supply
chain systems are developed here.
3.1. The SSSCS model
For the SSSCS, the total cost consists of three cost components: the cost of raw materials at the rst
stage, Cr , the cost of WIP in intermediate manufacturing stages, Cw , and the cost of nished goods at last
stage, Cf . They are discussed in detail as follows.
3.1.1. Cost of raw material inventory
For the raw material inventory, the economic ordering quantity (EOQ), Q is divided into Ko batches of
size Qr . The JIT batches arrive at xed intervals so that the input rate (replenishment) of the inventory is
steady. The behavior of the inventory model is illustrated in Fig. 4 that shows a classical saw-tooth type
EOQ model.
This inventory is referred to as a classical economic batch-size model where the total raw material
inventory cost, Cr , is given by



Q
D
C r Ar
1
Hr Iavg ;
Qr
Q
where Q=Qr is the number of batches placed in one cycle and D=Q is the number of cycle over one year.
Since the average inventory Iavg Qr =2, the raw material cost equation would be
Cr

Ar D
Qr
Hr :
Qr
2

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

159

I(t)
Qr

Qr

T/Ko

Qr

2T/ Ko

Qr

3T/ Ko

Qr

(Ko-1)T/K o

Fig. 4. Raw material inventory.

3.1.2. Cost of work-in-process inventory

The distinguishing characteristics of work-in-process model are shown in Fig. 5. The production uptime
of previous plant is Tu1 . During that time, m batches are shipped to the succeeding plant. The production of
previous plant stops when the quantity of parts produced by it is enough for the demand of succeeding
plant, and during the downtime, the demand of succeeding plant consumes the stocks.
During the uptime, the plant 1 continuously manufactures parts. When it is the time to deliver, the Qw
amount of parts are loaded onto the container with the kanban attached, and transported to plant 2. At this
time, the stock level does not drop to zero because of p1 P p2 . Then, WIP increases again to that level as
production continues. When the next delivering time is due, the Qw amount of parts is shipped to Plant 2,
and so on. Because p1 P p2 , the production is stopped at Tu1 such that the built-up inventory suce for the
remaining time of the cycle.
The cost of WIP, Cw , is comprised of setup cost, kanban delivering cost, and the inventory holding cost,
and for m shipment during the uptime and K shipments during the whole cycle it is given by
Cw As1

D
D
Qw
Aw
K
m 1:
Hw
Q
Qw
2

I(t)

p1

Qw
Qw
Qw

p1
p1
p1

Qw

Qw

Qw

Qw
Qw

T/K

2T/K

3T/K (m-1)T/K

(K -1)T/K

mT /K

Tu1
T

Fig. 5. Work-in-process level during one cycle.

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

3.1.3. Cost of nished goods inventory

The output of plant 2 is the nished goods. The total stock in the stage increases at a rate of p2 . The
nished goods are shipped to the buyers or to the warehouse. It is observed that the behavior of nished
goods inventory is the same as the WIP inventory. Therefore, Eq. (3) can be directly used for calculating
this nished goods average inventory and the cost of nished goods stage is given by
Cf As2

D
D
Qf
Af
Hf Kf
s 1;
Q
Qf
2

where components from left to right are the setup cost, kanban delivering cost, and the inventory holding
cost, respectively. The notation Kf and s has the similar meaning as in K and m, respectively.
3.1.4. Total cost of single-stage supply chain system
The inventory costs for raw material, work-in-processes, and nished goods are obtained. Thus, the total
cost of SSSCS can be written as
TCKo ; K; Kf ; Q Cr Cw Cf



A r Aw Af
D
D

As1 As2
Q
Qr Qw Qf
1
Hr Qr Hr Qr Hw Qw K
m 1 Hf Qf Kf
s 1
2
D
Ko Ar KAw Kf Af As1 As2
Q







Q Hr Hw Hf
D
D
Hw 1

Hf 1

;

2 Ko
p1
p2
K
Kf

where Qr Q=Ko , Qw Q=K, Qf Q=Kf , m KD=p1 and s Kf D=P2 .

3.2. The MSSCS model
Similar to the SSSCS, the total cost of MSSCS has the same structure except that the MSSCS has more
cost components of the intermediate WIPs.
3.2.1. Cost of work-in-process inventory
In Fig. 3, the production at plant i is carried at a rate of pi units/year. The parts produced by this plant
are built work-in-process inventory before they are shipped. As the stock level reaches to the batch size, Qwi ,
the parts are carried by containers from plant i to plant i 1. The semi-nished parts shipped to plant i
from the preceding stage are the input to this stage. Since the semi-nished parts are shipped by kanbans in
batches, the number of kanbans Ki , or the batch size Qwi (container size) should be determined optimally.
The work-in-process behavior in this stage is same as shown in Fig. 5. The cost of work-in-process
inventory in this stage is given as
Cwi Asi

D
D
Qwi
Awi
Ki
mi 1:
Hwi
Q
Qwi
2

3.2.2. Total cost of multi-stage supply chain system

Considering the cost of raw material and nished goods inventories, the total cost of MSSCS can be
written as

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

TCm Cr

N
X

Cwi Cf ;

161

i1

PN
where Cr is the cost of raw material inventory at rst stage, i1 Cwi is the costs of WIPs at intermediate
stages between plant 1 and plant N 1,P
and the Cf is the cost of nished goods inventory stage at the end
N
plant N 1. Plugging the values of Cr ; i1 Cwi and Cf into the TCm , it yields
"
#
N
X
D
Ar Ko
TCm K0 ; K1 ; K2 ; . . . ; KN ; Kf ; ; Q
Asi Awi Ki Af Kf
Q
i1
"





#
N
N
Q Hr X
Hwi Hf X
D
D

Hwi 1

Hf 1

:

2 Ko i1 Ki
pi
pN 1
Kf
i1
8
Let Ar Aw0 , Hr Hw0 , Af Aw;N 1 , Kf KN 1 , and Hf Hw;N 1 . Then Eq. (8) can be rewritten as
"
#
"


#
N
N 1
N 1
N 1
X
D X
Q X
Hwi X
D
TCm K0 ; K1 ; K2 ; . . . KN ; KN 1 ; Q
Asi
Awi Ki
Hwi 1

:
Q i1
2 i0 Ki
pi
i0
i1

3.3. ATSCS model

The costs of inventories at the mainline and branches are assumed to be independent, and hence, the
total cost could be obtained by adding all individual costs. The things need to be concerned are how many
branches are joined and how many quantities from each branch, Qi , should be to merge into the mainline.
For example, for manufacturing a six-cylinder engine of a car, the engine body is the mainline. The crank,
cylinder, valve, crankshaft etc are all manufactured in their branch lines. When assembling the engine, it
needs six cranks, twelve valves, and one crankshaft. If denoting the quantity of engine body Qe , the quantity
of crank Qc , the valves Qv , and crankshaft Qs , then the quantity relationship in terms of Qe is Qc 6Qe ,
Qv 12Qe and Qs Qe . The total cost of the mainline (a MSSCS), TCm is given by Eq. (9). The total cost of
branch lines (several SSSCSs and several MSSCSs), TCb , referring to Eqs. (5) and (9), is given by
( " d
#
" d


#)
d 1
d 1
N0
N
NX
NX
1
NX
d
d
d
X
Dd X
Q
H
D
d
wi
Ad
Adwi Kid
Hwi
1
d
TCb
:
10

Qd i1 si
2
Kid
pi
d1
i0
i0
i1
In Eq. (10), the superscript d indicates that the parameters and variables are in the branch line d,
d 1; 2; . . . ; N0 where N0 is the total number of branches. The notation N d indicates the plant numbers in
that branch.
The total cost of ATSCS, TCa is TCa TCm TCb . By considering the relationships and constraints of
the system, the aggregate ATSCS model is given by
Min

TCa TCm TCb

"
#
"


#
N
N 1
N 1
N 1
X
D X
Q X
Hwi X
D

Asi
Awi Ki
Hwi 1

Q i1
2 i0 Ki
pi
i0
i1
( " d
#
" d


#)
d 1
d 1
N
N
N
N
1
N
0
d
X
X
Dd X d X d d
Qd X Hwi
Dd
d

A
Awi Ki
Hwi 1
d

Qd i1 si
2
Kid
pi
d1
i0
i0
i1

subject to
Qd nd Q;

d 1; 2; . . . ; N0 ;

11

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

where Ki i 0; 1; . . . ; N 1, and Kid i 0; 1; . . . ; N d 1; d 1; 2; . . . ; N0 are all integers, and Q and

Qd d 1; 2; . . . ; N0 are all real numbers. It is a mixed-integer nonlinear function (MINLP). The symbol
nd denotes the quantity relation between the main line and branch d in one period. It is observed that
the each branch line including the mainline is a MINLP problem, and solving this problem optimally is
hard.

4. The solution of MINLP for SSSCS

The MINLP problems can be solved by using several algorithms such as branch-and-bound (B&B)
technique, generalized Benders decomposition (GBD), the alternative dual approach, the outer approximation/equality-relaxation (OA/ER) and the feasibility technique (Duran and Grossmann, 1986). Among
them, the B&B, GBD, and OA/ER are the most-used ones to solve MINLP problems. In this research, the
MINLP models developed are hard to be partitioned into continuous variables and noncontinuous variables. Thus, B&B algorithm will be adopted to solve the problems. The nonlinear programming (NLP)
problem, a relaxed version of the original MINLP is used as basis for the B&B technique.
Algorithm 1. [B&B Algorithm for Solving MINLP]
Step 1: Solve the relaxed NLP version of the original problem, and set its objective functional value, TC as
the lower bound of the optimal solution of MINLP problem, ZL TC;
Step 2: If the solutions are integers, process stops and the optimal solution is obtained; if not, set the upper
bound ZU ! 1;
Step 3: Form the subsets by adding constraints one at a time and the resulting NLP relaxed subsets are
solved one by one; Check the feasibility of the solutions, keep the feasible solutions to form the
nodes.
If the solutions are integer, update ZL i.e., set ZL equal to the new solution;
Step 4: Compare ZL with ZU : If ZL 6 ZU , update ZU by ZU
ZL ;
Step 5: Look for the most promising node for further fathoming;
Step 6: Repeat Steps 24.
To test whether the stationary point X s Ko ; K; Kf ; Q corresponds to a minimum, the convexity of the
NLP function needs to be proved evaluating the Hessian matrix. As indicated before, the ATSCS consists
of several SSSCSs and/or MSSCSs. The solution methodology for MSSCS problems is the same as SSSCS
problems. When SSSCS problems are solved, the MSSCS problems as well as the ATSCS problem are easy
to be solved.
Example 1. For a single-stage supply chain system, the demand rate D, production rate p1 and p2 , setup
cost (kanban shipping cost) As1 and As2 , setup cost (manufacturing cost) Ar , Aw1 and Awf , and holding cost
Hr , Hw1 and Hwf are given in Table 1 below.
Plugging the values in Table 1 into Eq. (5), it yields:



50; 000
9
6
7
11Ko 10K 12Kf 55 2:5Q
Min Z TCKo ; K; Kf ; Q
1:81 ; 12
Q
Ko K Kf
Ko , K, Kf P 1 and are integers.
By following the B&B algorithm, nally the optimal result is obtained at X s Ko ; K;
Kf ; Q 6; 5; 6; 966, total cost Z  $24; 941. The solution sequence including the best solution is shown
in Table 2:

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

163

Table 1
The system parameters for a SSSCS
D (units/year)

P (units/year)

Setup cost (shipping)

(dollars/batch)

Setup cost
(dollars/setup)

Holding cost
(dollars/unit/year)

5000

p1 5600
p2 6000

As1 300
As2 250

Ar 110
Aw 100
Af 120

Hr 45
Hw 30
Hf 35

Table 2
A set of four best solutions
Ranked sequence

X s Ko ; K; Kf ; Q

Z values (dollars)

1
2
3
4

(6,
(6,
(6,
(5,

24,941
24,963
25,008
25,030

5,
5,
4,
5,

6,
5,
6,
5,

966)
925)
916)
879)

5. Heuristic for solving ATSCS

The ATSCS problem consists of several MINLPs, therefore, it is harder to solve than to solve a single
MINLP problem. On the other hand, the problem expands fast as the number of integer variables gets large
in a single MINLP problem. In most large cases, it is impossible to solve the ATSCS problems optimally by
a B&B method. Therefore, a heuristic is needed to obtain an acceptable solution to such a real life (large)
problem.
5.1. Construction solution
The ATSCS problem will be attempted by aggregating the individual solution to form a simple construction solution in which the mainline problem is rst solved independently with Algorithm 1. Once the
batch quantity, Q, is obtained, the gradual use of relationship Qd nd Q into the corresponding branch line
MINLP will solve one problem at a time until all branch line MINLPs are solved. Finally, aggregating the
costs of all branch MINLPs including the one with the mainline will yield the total cost of ATSCS. This
procedure is presented in the Algorithm 2.
Algorithm 2. [Construction Heuristic for Aggregating the ATSCS Problem]
Step 1: Formulate the mainline MINLP problem, and obtain the total cost TCm and batch quantity Q.
Step 2: Substitute the relationship Qd nd Qd 1; . . . ; N0 into the corresponding branch line MINLPs.
Step 3: Solve the branch line MINLPs for one problem at a time until all MINLPs are solved; store the
total cost TCd d 1; 2; . . . ; NP
0 .
N0
Step 4: Sum all costs, TCa TCm d1
TCd .
Example 2. In a supply chain system congured as in Fig. 6, there are nine plants which form three
production lines: Plants S1S4 form the main production line, and S5 and S6, S7S9 form two branches.
Lets call the branch formed by S5 and S6 Branch 1 which merges into mainline at node 1 (Plant 2).
Similarly, lets call the branch that is consisted of Plants S7 through S9 Branch 2 that merges into the
mainline at node 2 (Plant 3).
We further assume that the amount produced per period in the mainline is Q. In the same period, the
volume needed in branch 1 is 3 times what is needed in the mainline and the volume needed in branch 2 is 4

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

Fig. 6. A small assembly-type supply-chain system

times what is needed in the mainline, i.e., Q1 3Q and Q2 4Q. Accordingly, at the same times, the demands of the branches should also be the demand of the mainline, i.e., D1 3D and D2 4D. The other
parameters of the system are given in Table 3. The problem is to nd the batch size in each stage, and the
number of batches in each line in a two-branch assembly-type supply-chain system.
Substituting the values from Table 3 into Eq. (11), it yields:
Min TCb K0 ; K1 ; K2 ; K3 ; K4 ; Q; K01 ; K11 ; K21 ; Q1 ; K02 ; K12 ; K22 ; K32 ; Q2



5  104
45 30 45 25 35
11K0 10K1 8K2 12K3 10K4 120 Q

14:9
K0 K1 K2 K3 K4
Q




1:5  105  1
15 14 12:5
1
1
1

8K0 6K1 9K2 47 Q

1 6:625

Q1
K01 K11
K2



5

2  10
14 15 12:5 10
2
2
2
2
2

7:5K0 6K1 10K2 9K3 75 Q

2 2 7:5 :
13

K02 K12
K2
K3
Q2
subject to
Q1 P 3Q;

13a

Q2 P 4Q;

13b

K0 ; K1 ; K2 ; K3 ; K4 ; K01 ; K11 ; K21 ; K02 ; K12 ; K22 ; K32 P 1; and integers:

Table 3
The system parameters of a 9-plant assembly-tree type supply chain system
Production line

Mainline

D (units/year)

5000

P (units/year)

Setup cost
(shipping)
(dollars/batch)

5500
5600
6000
5500

As1
As2
As3
As4

300
250
300
350

Setup cost
(dollars/setup)

Holding cost
(dollars/unit/year)

Ar 110
Aw1 100
Aw2 100
Aw3 100
Awf 100

Hr 45
Hw1 30
Hw2 45
Hw3 25
Hwf 35

Branch 1 S5S6

15,000

p11 20,000
p11 20,000

A1s1 220
A1s2 250

A1r 80
A1w1 60
A1w2 90

Hr1 30
1
Hw1
28
1
Hw2
25

Branch 2 S7S8S9

20,000

p12 25,000
p22 25,000
p32 25,000

A2s1 250
A2s2 300
A2s3 200

A2r 75
A2w1 60
A2w2 100
A2w3 90

Hr2 28
2
Hw1
30
2
Hw2
25
2
Hw3
20

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

165

In Eq. (13), the rst two terms are made up by the mainline, the third and fourth terms are from branch
1, a single-stage supply chain system, and the last two terms are from the branch 2, a two-stage supply chain
system. According to the Algorithm 2, the MINLP problem of the mainline is solved rst:
Step 1: The mainline is a four-stage system, and the solutions can be obtained by following the procedures
in Example 1 as X m K0 ; K1 ; K2 ; K3 ; K4 ; Q 6; 5; 7; 4; 5; 900 which yields the total cost
TCm X m TCm 6; 5; 7; 4; 5; 900 $43,301.
Steps 23: Two branch problems are solved in order of branch number (a) and (b).
(a) Branch 1: Plugging Q1 3Q 3  900 2700 into its corresponding MINLP problem, it
yields



 1

15 14 12:5
Min TC 55:6 8K0 6K11 9K21 47 2700

6:625
:
14

K01 K11
K21
Eq. (14) is purely anonlinear integer program. A B&B
 method is still applicable and the solutions
are given by X1b K01 ; K11 ; K21 10; 11; 8 and TC1b K01 ; K11 ; K21 $44,315.
(b) Branch 2: Using the same procedure, the integer solutions to branch 2 are obtained. Plugging
the relation, Q2 4Q 4  900 3600 into its corresponding MINLP problem, it
gives





14 15 12:5 10
Min TC 55:6 7:5K02 6K12 10K22 9K32 75 3600

7:5
:
15

K02 K12
K22
K32




The solutions to branch 2 are X2b K02 ; K12 ; K22 ; K32 11; 13; 9; 8 and TC2b K02 ; K12 ; K22 ; K32
$67,319.
Step 4: The total cost for theP
whole system can be obtained by simply summing the mainline and branch
N0
costs. TCa TCm d1
TCd $43,301+($44,315+$67,319) $154,935.The nal solutions for
the whole system are given in Table 4.
5.2. Improving the aggregate solution
Algorithm 2 is an aggregate solution method for the whole system. It may be worth developing an
improvement heuristic to obtain a better solution over the result of a construction heuristic in Algorithm 2.
Table 4
The nal solutions of the whole system
Production line

Quantity in one period, Q

Number of batches
in each stage
6
5
7
4
5

Sub-total cost
($)

Aggregate cost
dollars/year

43,301

$154,935

Mainline

900

Branch 1

2700

K01 10
K11 11
K21 8

44,315

Branch 2

3600

K02
K12
K22
K32

67,319

K0
K1
K2
K3
K4

11
13
9
8

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

In this attempt, Algorithm 2 provides an initial result to the improvement heuristic. The improvement
heuristic then searches the neighbor of the initial solution and seeks for any improvement on the result.
Thus, a better result maybe obtained through the improvement heuristic.
Algorithm 3. [Improvement heuristic for the ATSCS]
Step 1: Apply Algorithm 2 to MINLP of ATSCS to obtain the total quantity of the parts produced, Q in
one period in the mainline, and evaluate total cost TCa .
Step 2: Set TCa as an initial result and set a search boundary of Qt to Q (a search range). Also, set a
search step ks .
Step 3: Search the neighborhood Q  Qt If there is a reduction in the total cost TCa , then update TCa and
store the corresponding Q and the all batch sizes in their respective lines.
Step 4: If Q is within the search range then repeat Step 3, otherwise stop and print the current values of
TCa , Q and the all batch sizes.
Algorithm 3 basically improves the solution obtained by Algorithm 2. Example 2 is continued to
illustrate Algorithm 3 to obtain a better solution for the ATSCS problem.
Example 3. An improvement solution for a two-branch assembly-type supply chain system.
Stage 1: Applying Algorithm 2 to Example 2, the results are shown in Table 4. Among them, the total
quantity of the parts produced in one period in the mainline, Q 900, and the total cost
TCa $154; 935.
Stage 2: Set TCa $154; 935 as an initial result, and set a search boundary of Qt 800 and a search step
ks 20.
Stage 3: Search the area of Q  Qt 900  800, Q 100; 1700. First, the current Q 900
ks 880 is
checked and these results are shown in Table 5. As there is an improvement in the total cost TCa ,
then update TCa to $154,097.
Stage 4: As Q is within the search range, repeat Step 3, and the search results of Algorithm 3 are reported
in Table 6.
The directional search results are reported in Table 6. In Table 6, the minimum cost is found at Q 480
with the total cost TCa $142; 783. The corresponding best results are shown in Table 7. In this example,
Table 5
The search results of the whole system for Q 880
Production line

Quantity in one
period, Q

Number of batches in each

stage
6
5
7
4
5

Subtotal cost
(dollars)

Aggregate cost
(dollars/year)

43,312

154,097

Mainline

880

Branch 1

2640

K01 9
K11 10
K21 8

43,972

Branch 2

3520

K02
K12
K22
K32

66,813

K0
K1
K2
K3
K4

11
12
9
8

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

167

Table 6
Total costs of mainline and branch lines for dierent batch sizes in the mainline
Batch size Q
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
420
440
460
480
500
520
540
560
580
600
620
640
660
680
700
720
740
760
780
800
820
840
860
880
900
920
940
960
980
1000
1020
1040
1060
1080

Mainline
9,999,999
82,944
74,714
69,029
65,041
61,990
59,646
57,571
55,673
53,936
52,610
51,596
50,381
49,476
48,769
48,104
47,569
47,017
46,554
46,096
45,728
45,447
45,242
44,943
44,718
44,502
44,291
44,114
43,953
43,838
43,763
43,679
43,618
43,575
43,478
43,421
43,393
43,355
43,343
43,312
43,301
43,311
43,324
43,350
43,394
43,428
43,438
43,450
43,477
43,520

Branch 1

Branch 2

49,438
46,472
44,122
42,202
40,616
39,675
39,028
38,522
38,159
37,899
37,696
37,582
37,520
37,541
37,661
37,685
37,800
37,912
38,089
38,282
38,488
38,698
38,909
39,140
39,397
39,692
39,952
40,210
40,481
40,780
41,105
41,410
41,693
41,998
42,324
42,669
42,990
43,301
43,629
43,972
44,315
44,652
44,993
45,336
45,687
46,033
46,383
46,743
47,096
47,450

125,870
107,502
94,789
85,611
78,788
73,615
69,641
66,567
64,185
62,347
60,943
59,893
59,134
58,618
58,306
58,118
58,052
58,118
58,251
58,405
58,652
58,982
59,336
59,671
60,044
60,425
60,809
61,219
61,646
62,086
62,520
62,956
63,428
63,892
64,368
64,844
65,322
65,816
66,318
66,813
67,319
67,822
68,346
68,857
69,368
69,897
70,431
70,955
71,480
72,013

Total cost (dollars)

10,175,407
236,918
213,625
196,842
184,445
175,280
168,315
162,660
158,017
154,182
151,249
149,071
147,035
145,635
144,736
143,907
143,421
143,047
142,894
142,783
142,868
143,127
143,487
143,754
144,159
144,619
145,052
145,543
146,080
146,704
147,388
148,045
148,739
149,465
150,170
150,934
151,705
152,472
153,290
154,097
154,935
155,785
156,663
157,543
158,449
159,358
160,252
161,148
162,053
162,983

although each set of solution in Table 7 is not in its optimal condition, the solution is at its best state if the
manager organizes his/her production schedule for the ATSCS using the information in the table.

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

Table 7
The best results of the whole system
Production line

Quantity in one
period, Q

Number of batches
in each stage
6
5
7
4
5

Sub-total cost
(dollars)

Aggregate cost
(dollars/year)

46,092

142,783

Mainline

480

Branch 1

1440

K01 9
K11 10
K21 8

38,282

Branch 2

1920

K02
K12
K22
K32

58,405

K0
K1
K2
K3
K4

11
12
9
8

The solution method used for solving the ATSCS in this research decomposes the problem to several
sub-problems, which lets the sub-problems to be solved one by one easily. In the ATSCS, the quantity of
products in the period is important information for the whole system. It is a tying mechanism that connects
the mainline and the branchesthe production is hard to organize without this.
Since, for the same number of variables (plants), the assembly-tree structures of a supply chain may vary
with dierent situations, the performance measures in terms of computational time and nodes searched will
be hard to keep track. For the same number of plants, it will create an ambiguity in evaluating the system in
terms of complexity and computation time, and thus, we did not pursue this aspect of study.
Numerical examples illustrate the two heuristic procedures well and a good solution is obtained for the
ATSCS problem through two dierent heuristics. There is a dierence in solutions between the constructive
heuristic and the improvement heuristic, especially in the quantity, Q because the Q is much more sensitive
in the ATSCS model. An ATSCS is formed with several SSSCSs and MSSCSs. Therefore, the ATSCS
model consists of a number of MINLPs since each SSSCS and each MSSCS forms a MINLP. The mainline
batch size Q is very sensitive in the model because it ties the whole production line. That is why in the
numerical Example 3, it shows that Q 900 found by a constructive heuristic, and later Q 480 found by
an improvement heuristic that renes the solution of the construction heuristic. But, the total cost in both
heuristic is relatively close ($154,935 in construction heuristic and $142,783 in improvement heuristic) and
the number of batches in the mainline and branches are only reorganized. Numerical examples illustrate the
two heuristic procedures and a better solution is obtained for the ATSCS problem.
6. Kanban operation planning
The containers with attached kanbans transport the WIP from the upstream plant to the succeeding
plant. Each container may circulate more than once during the cycle time T , depending on the loading time
(at the preceding plant), unloading time (at the succeeding plant), and transportation time between these
two plants. The problem of determining the number of containers will be solved using queuing concept.
6.1. Optimal number of containers
An M/M/c model as shown in Fig. 7 can describe the circulation of kanbans between two adjacent
plants. The customer arrival is reected by the shipment of a batch in a supply chain system. Assume that a

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

169

Fig. 7. Kanban operation between two plants.

shipment (loaded kanban container) arrives following a Poisson process. Let the arriving rate k be the
number of batches per unit time. Then, the mean time between two successive batches is 1=k. The server is
the container (vehicle) that transports the parts. The kanban service time includes the transportation time
(arrival and dispatch) between two adjacent plants, the time spent in loading and unloading the parts, and
processing time at both plants. Let l be the rate of service in terms of completions per unit time. Therefore,
1=l is the mean service time of kanban. The queue discipline is rst-come, rst-served (FCFS). The
objective of management is to determine the number of servers (containers) that must be employed to
deliver the materials smoothly to the succeeding plant.
In this queuing system, determining the number of containers is equivalent to determining the number of
servers. The time unit used in the queuing model is the cycle time T . For example, if there are 10 shipments
within the cycle time T , the arrival rate is k 10 shipments/T . If the succeeding plant consumes a shipment
in T =8, i.e., 1=l T =8, and the service rate l 8 shipments/T . The results of this M=M=5 system analysis
are obtained in Table 8.
As the proportion of time that all kanban containers are idle, p0 0:067, and the mean waiting time in
the queue, Wq 0:0231T are both small, the system seems to be working well.
In this M=M=c model, let cs indicate the cost per kanban container (dollars/container), cw indicate the
cost of waiting per shipment (dollars/shipment). Then, the expected value of total cost for the M=M=c
queuing model is
ETC cs c cw L;

16

where c (the number of containers) is the only decision variable. L is the mean number of containers waiting
in the system, which is a function of c. The optimal solution can be obtained by using ETCc

1 P ETCc  6 ETCc 1. Since c is an integer, ETC is not continuously dierentiable and hence,
ETC values are calculated at dierent values of c 1; 2; . . . and the optimal c is chosen corresponding to
the smallest ETC value, ETCc .

Table 8
Steady state measures of kanban system
Parameter

Mean value

Proportion time that all kanban containers are idle

Mean number of shipments in the queue
Mean number of shipments in the system
Mean waiting time in the queue
Mean time spent in the system

p0 0:067
Lq 0:1847
L 2:8514
Wq 0:0231T
W 0:3564T

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

Table 9
Inter-arrival and service times of containersa
Shipment
1
2
3
4
5
6
7
8
a

Inter-arrival
0.10
0.08
0.09
0.13
0.13
0.11
0.22
0.13

Service time of containers

Kanban 1

Kanban 2

Kanban 3

Kanban 4

Kanban 5

0.33
0.24
0.52
0.38
0.32
0.07
0.19
0.47

0.39
0.29
0.34
0.04
0.04
0.28
0.55
0.40

0.27
0.22
0.23
0.34
0.33
0.30
0.58
0.34

0.30
0.03
0.14
0.43
0.16
0.70
0.52
0.33

0.50
0.34
0.23
0.17
0.12
0.32
0.43
0.49

All units are in T .

6.2. Kanban scheduling

From Eq. (16), the optimal number of kanban containers to deliver the batches can be obtained in each
kanban stage. For example, in Table 7, we obtained K2 7 in mainline, which indicates the kanban stage 2 has
seven batches to be delivered. The seven batches in the kanban scheduling problem is the arriving rate. If it
follows a Poisson process, and kanban containers service time is an exponential distribution, using Eq. (16) the
optimal number of kanban containers, c , is calculated. This calculation can apply to all kanban stages in both
mainline and branches. After this procedure, both the number of batches and the number of containers are
known. Then, based on this information, the kanban scheduling can be performed, which is discussed below.
Table 9 gives ve-kanban (ve-container server) circulation problem with their inter-arrival and service
times. The rst batch arrives at 0:10T , the second batch arrives at 0:08T after the rst batch, and so on. The
values in the column Kanban stand for container service time. For example, 0.33 means that Kanban 1s
rst service needs 0:33T , its second service time is 0:24T , and so on. The operation schedule according to
these sequences is illustrated in Fig. 8 that shows the steady state of the kanban transportation system
between two adjacent plants.
The same methods developed above are applicable for determining the number of kanbans and their
operation schedule in an ATSCS. The reasons are that the ATSCS is composed by the several SSSCSs and/
or MSSCSs, and each SSSCS or MSSCS is independent once the batch size and number of batches are
determined in all kanban stages.

7. Conclusions
It is usually dicult to develop a generalized mathematical model for a supply chain system that
incorporates all its salient features such as demand pattern, lead-time (processing time, waiting time,
conveying time), information (kanban) delivery time/cost, setup time/cost, production capacity, and batch
size. This research employs two phases to describe the supply chain system: the MINLP model to represent
the cost of a supply chain inventory and the queuing model to schedule the kanban circulation. From the
solution of MINLP, the number of batches in each stage and the total quantity of products produced in one
period in the manufacturing system are obtained. Next, the number of kanbans that are needed to deliver
the batches from upstream plant to the downstream plant is determined from the results of the MINLP. In
the ATSCS, the total quantity of parts produced in the mainline and in each branch over a period ties the
mainline and the branches. Meanwhile, the individual stages in the mainline or branches are tied by the
total quantity of products produced in the corresponding line over a period. In order to calculate the total
cost, only the branch numbers and the plant numbers in the branches are needed to consider.

S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

Arrival 0.10T 0.08T 0.09T

0.13T

K1

0.13T

0.13T

0.22T

(K1 ready)

(K1 ready)

0.33T

0.11T

171

K1 idle

0.24T

K1 idle

K2
(K2 ready)

0.39T

K3
0.27T

K2 idle

0.29T

(K3 ready)

K3 idle

K4
0.30T

(K4 ready)

0.39T

K4 idle

K5
0.50T

(K5 ready)

Fig. 8. Kanban container operation planning.

The kanban technique can be applied to the places where the material to be delivered to the other
places can be shipped in batches. The most important conclusions found in this research are consolidated
below:
(1) Assembly and network type operations can be decomposed as single-stage and multi-stage supply chain
problems and the aggregate solution is evident for the ATSCS problem that can be operated by a kanban mechanism.
(2) The SSSCS and MSSCS form MINLP problems that can be solved optimally by B&B method for small
instances. An ATSCS problem forms a number of MINLPs and the size of decision variable in formulating the problem is quite large. The instances become large if there are many branches, and in the
MSSCSs the number of integer variables increases with the number of plants. In these cases, the
B&B approach fails to provide the optimal solution because the computational time increases dramatically as the number of integers increases. Hence, the heuristic is needed to obtain the practical solutions.
(3) A two-phase heuristic is developed based on the B&B algorithm and the decomposition of ATSCS. The
constructive heuristic (Algorithm 2) is devised to partially overcome the dimensional problem for solving a large instance of the problem. Later, an improvement heuristic (Algorithm 3) is presented to obtain a better solution through neighbor search of the initial solution provided by the constructive
heuristic.
(4) The number of batches may not be equal to the number of containers, but, since every shipment is
accompanied by a kanban, the number of kanbans is equal to the number of batches. The number
and size of containers determines the operations schedules.

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S. Wang, B.R. Sarker / European Journal of Operational Research 162 (2005) 153172

Overall, the models developed here can help a manager quickly respond to consumers need, determine
the right policies to order the raw material, deliver the nished goods, and eciently manage their operations. As a result, an organization can economically benet in saving money by eectively managing a
supply chain.

Acknowledgements
The authors are thankful to the anonymous referees for their thorough review, critical comments and
constructive suggestions to improve the presentation of the paper.

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