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Integration of product architecture and supply chain under currency exchange rate fluctuation

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Abstract

Various studies have discussed the coordination of product and supply chain design decisions for global supply chain management. However, the impact of currency exchange rate uncertainty on the selection of product architectures and their suppliers has not been sufficiently addressed. As a response, this study proposes a two-stage stochastic optimization model in which the first stage determines the product architecture, and the second stage identifies suppliers for the modules and components in an optimal fashion based on the product architecture and uncertain currency exchange rates. The overall objective of two-stage stochastic programming is to determine the optimal product architecture that minimizes the expected total supply chain cost over uncertain currency exchange rate scenarios. The proposed model is applied to a bicycle supply chain case study for three global marketplaces associated with multiple currency exchange rates. The results demonstrate that optimal product architecture and its suppliers should be varied based on currency exchange rates and their uncertain fluctuation levels. Also, a product architecture for the supply chain of each marketplace maintains its optimality in the total supply chain cost, up to a specific exchange rate. The findings show the importance of joint integration between product and supply chain design when considering currency exchange rates. Additionally, the benefit of stochastic modelling is demonstrated by comparing the solution quality of the model with its deterministic counterpart.

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Acknowledgment

This work was partially supported by a TUBITAK (The Scientific and Technological Research Council of Turkey) Postdoctoral Research Fellowship. The authors would like to thank ICPR 25, which provided an opportunity to discuss and improve the preliminary work of this study (Günay et al. 2019).

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Authors and Affiliations

  1. Department of Industrial Engineering, Sakarya University, 54050, Sakarya, Turkey

    Elif Elçin Günay

  2. Department of Industrial and Management Engineering, Incheon National University, Building No. 8 #466, Incheon, 22012, Republic of Korea

    Kijung Park

  3. Department of Industrial and Manufacturing Systems Engineering, Iowa State University, Ames, IA, 50011, USA

    Elif Elçin Günay & Gül E. Okudan Kremer

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  1. Elif Elçin Günay
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  2. Kijung Park
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  3. Gül E. Okudan Kremer
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Correspondence to Kijung Park.

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Appendix 1

Appendix 1

See Table 10, 11, 12.

Table 10 Supplier information (Chiu 2010; Chiu and Okudan Kremer 2011, 2014)
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Table 11 Distance (km) between component supplier and module supplier
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Table 12 Distance (km) between module supplier and headquarter
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Günay, E.E., Park, K. & Okudan Kremer, G.E. Integration of product architecture and supply chain under currency exchange rate fluctuation. Res Eng Design 32, 331–348 (2021). https://doi.org/10.1007/s00163-021-00361-0

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