Abstract
This paper extends and generalizes former inventory models that apply algebraic methods to derive optimal supply chain inventory decisions. In particular this paper considers the problem of coordinating production-inventory decisions in an integrated n-stage supply chain system with linear and fixed backorder costs. This supply chain system assumes information symmetry which implies that all partners share their operational information. First, a mathematical model for the supply chain system total cost is formulated under the integer multipliers coordination mechanism. Then, a recursive algebraic algorithm to derive the optimal inventory replenishment decisions is developed. The applicability of the proposed algorithm is demonstrated using two different numerical examples. Results from the numerical examples indicate that adopting the integer multiplier mechanism will reduce the overall total system cost as compared to using the common cycle time mechanism.
Highlights
BackgroundFormerly, there was no proper coordination of operations decisions among the different members of the supply chain
The algorithm initializes the predefined recursive structures required by step one for computing the optimal integer multipliers
Step one continues iteratively computing the remaining predefined recursive structures required for determining the optimal integer multipliers K1 thru Kn−1
Summary
There was no proper coordination of operations decisions among the different members of the supply chain. The absence of collaboration will result in disconnected processes and individual decisions at every partner in the supply chain. According to Mahdavi et al [1], the absence of coordination generates a conflict in the objectives of the members sharing the same supply chain. Effective inventory management system to enhance the operational efficiency and competitiveness of enterprises requires the integration of the entire supply chain system [4]. The advances in information, communication technologies, and supply chain management (SCM) tools have encouraged managers to seek a full integration and close collaboration; see for instance, [5,6,7,8]
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