An Integrated Inventory and Order Pickup Model in the MVSB System considering Capacities of Vendors

Abstract

To reduce inventory and pick-up costs, a mutually beneficial collaboration between suppliers and manufacturers is the basis for developing an integrated inventory and order pick-up model, known as Inbound Inventory Routing Problems (IIRP). Unfortunately, the IIRP model developed so far has not been able to accommodate several manufacturing industry problems, including vendors’ limited capacities. Concerning these conditions, this study aims to develop an IIRP model in the Multi-Vendor Single-Buyer (MVSB) systems considering suppliers’ limited capacity. The total relevant cost consisting of set-up costs, ordering costs, holding costs, and the pick-up cost is kept to a minimum. The IIRP model developed in this study is classified as mixed-integer non-linear programming (MINLP), which can be solved using an analytic, heuristic, or metaheuristic approach. Model testing was carried out on the MVSB system by developing three numerical examples. Each of them involved three suppliers of similar parts, then solved using an analytic approach. The results obtained show that the three numerical examples’ global optimum solutions were found. Based on these numerical models and criteria, it is recommended that parts pick-up from suppliers be carried out as often as possible in small lot sizes, consistent with the JIT procurement.