An integrated NPV-based supply chain configuration with third-party logistics services

Abstract

Abstract A well-designed supply chain configuration yields positive net value by creating benefits, reducing costs, and improving firm’s profitability. Nowadays, supply chain also includes third-party logistics service providers (3PLs) which are usually contracted by the supplier or manufacturer to supply integrated logistics services to the buyers or consumers. Efficient utilization of 3PLs is expected to bring benefits such as reducing total costs thereby maximizing profits. The purpose of this research paper is to propose a multi-objective optimization model to derive an integrated net present value-based supply chain configuration for a manufacturing enterprise incorporating the effect of third-party logistics service providers in an uncertain demand scenario. Firstly, the paper presents the conceptual framework considering the third-party logistics service providers for a manufacturing enterprise and thereafter a multi-objective optimization model is proposed to find a compromise solution to NPV maximization and total cost minimization. The model also makes use of Chance Constraint methodology to handle demand uncertainties.