Strategies for Controlling Cost in a Specific Supply Chain Model

Supply chain is likely to output invisible cost when demand of products increasing. In this paper, we first consider a cooperative, two-stage supply chain consisting of three members: suppliers, manufacturer and distributers. Based on the simplified supply chain, we present an overview of cost which is relevant to manufacturer from upstream to downstream, also reveal the key factors that drive the effectiveness of supply to realize better performance. Next we focus on the certain factors and create a model for interpreting how supply chain operates. From the simulation of model, we present how invisible cost emerges and how to limit it within an acceptable level. In addition, we discuss the uncertain elements which might influence the model. Eventually, we conclude when the demand increased, there will be invisible emerging. The previous method of improving collaboration in supply chain will be not enough to reducing it. Supply chain member, especially manufacturer should adopt some new ways like decentralize plant to reduce invisible cost.