An Optimal Investment Model for Single Supplier-Single Customer Partnership Performance Improvement in Shipbuilding Supply Chains
A mathematical programming model employing activity-based costing is developed for material procurement performance improvement in a single supplier-single customer environment in shipbuilding. Four types of activities are identified as targets of cost reduction: supplier caused (reflected) and customer caused (reflected) activities. Complete information exchange is assumed between supplier and customer, with a view to obtaining maximum cost reduction through joint investments by the supplier and the customer, subject to their budgetary constraints. A real case of shipbuilding of boats and barges for inland waterways in the Amazon region in Brazil is used to test the applicability and utility of the mixed integer programming model.