The effect of human factors on the performance of a two level supply chain

Abstract

Many studies have addressed the issue of coordination in a supply chain. Coordinating mechanisms such as joint lot sizing models, quantity discounts and delay in payments have been used to achieve coordination in a supply chain. An important omission in this literature is the role of human factors, in particular inspection errors and learning, as a tool to improve coordination in a supply chain. In this paper, two coordination mechanisms found in the literature are integrated into a model for a two-level supply chain in which the incoming quality level of raw materials provided to a vendor by a set of suppliers is not perfect. The model addresses supply chain coordination by specifically investigating the role of different human factors on the total cost of the supply chain. These factors are: (a) type I and type II inspection errors; (b) learning in the production process; and (c) learning in quality at the suppliers’ end. Numerical examples are used to compare the costs of the three extensions with the base model (with no defectives).