Abstract
This model investigates the variable production cost for a production house; under a two-echelon supply chain management where a single vendor and multi-retailers are involved. This production system goes through a long run system and generates an out-of-control state due to different issues and produces defective items. This model considers the reduction of the defective rate and setup cost through investment. A discrete investment for setup cost reduction and a continuous investment is considered to reduce the defective rate and to increase the quality of products. Setup and processing time are dependent on lead time in this model. The model is solved analytically to find the optimal values of the production rate, safety factors, optimum quantity, lead time length, investment for setup cost reduction, and the probability of the production process going out-of-control. An efficient algorithm is constructed to find the optimal solution numerically and sensitivity analysis is given to show the impact of different parameters. A case study and different cases are also given to validate the model.
Highlights
In the current competitive business world each and every company would like to make more profit with less investment
A two-echelon supply chain with both buyers and a vendor was developed by Sarkar [3] with several types of deterioration
This model is concerned with a two-echelon supply chain model, where multiple buyers take a single type of products from a single vendor
Summary
In the current competitive business world each and every company would like to make more profit with less investment. In 1996, Ouyang et al [8] proposed an integrated model in which they considered backorders and variable lead times. The quality of product can be improved by some investment discussed by Sarkar and Moon [42] They reduced the setup cost for an imperfect production process in this model. Different researchers have developed different types of models under consideration of imperfect production, multi-product production systems with safety stock, and improved quality production processes under setup cost reduction (see for reference Sarkar et al [12]). No one has developed a model for a single vendor-multi-buyer with consideration of a partial backorder, normally distributed lead time, shortages, and a variable production cost along with discrete investment for reduced setup cost for the vendor and an investment for improvement of the quality of the manufacturing process. The problem, which is solved by this model, along with notations and assumptions are briefly described
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