An integrated inventory model for multi-echelon supply chains with deteriorating items: a price-dependent demand approach

Abstract

ABSTRACTThis study develops an operational policy for a three-echelon supply chain. A mathematical programming model is proposed to maximize the combined profit of the suppliers, manufacturers, and distributors. The model is developed under the supply chain management paradigm, which highlights the cooperation of all the nodes along the supply chain to improve performance criteria like total profit. We take into account the deteriorating nature of raw materials and final products. The proposed model was then applied to a real-world case of an Iranian supply chain active in the detergent production industry using its historical data for parameters. The model was solved using GAMS. Results indicate that the integrated approach was able to increase the supply chain’s total profit by 15%. Sensitivity analysis also showed that variable costs of final products are high, leaving a shallow margin. Other managerial insights are also drawn from results.