A Model for Optimizing Traceability of Product in a Supply Chain Based on Batch Dispersion

Abstract

Product recall appears as a nightmare for manufactures as it may lead to bankruptcy. Recent product recalls stimulated manufacturers to enhance product safety in their supply chain. Implementation of traceability system now becomes necessary part of product safety strategies. Product recall crisis dramatically affect the revenue of firms which may lead to serious outcomes. Large recall induces great recall cost such as cost of notification and destroying or repairing recall products. Effective design of traceability system may turn out to be significant tool for managing recall crisis and product safety issues in production system. Traceability systems are widely used to minimize the probability and quantity of recalls however literature shows that manufacturers still not getting substantial results. This chapter develops a model to optimize the traceability based on batch dispersion methodology in order to minimize the expected recall cost and other operational cost aiming to increase shareholder profit. The simulation analysis is also carried out to test the various production strategies and its impact on profit. The analysed result show that expected shareholders profit reduces with reduction in level of traceability. It is also concluded that manufacturers should not only depended on operational costs for batch size optimization but shareholders profit should also be considered during recall crisis.