Abstract
An integrated inventory model for vendor and buyer is presented in this paper. Based on the integrated expected total relevant costs of both buyer and vendor, we obtain the optimal values of reorder point, order quantity, and number of shipments. Numerical example shows the model is effective, and it is also used to analyze the savings in joint total cost over individually derived policies.
Highlights
With the increased competition in today’s global markets, companies are forced to closely work in partnership with their customers and suppliers
With the growing focus on supply chain management, many companies are recognizing that inventories across the entire supply chain can be more efficiently managed through better coordination of the supply chain
If each stage of the supply chain only optimizes its local objective without considering the impact on the complete chain, lack of coordination results that total supply chain profits are less than what could be achieved through coordination (Stadtler H 2005, Goetschalckx M et al.2002)
Summary
With the increased competition in today’s global markets, companies are forced to closely work in partnership with their customers and suppliers. This paper considers a supply chain consisting of one vendor and one buyer. The optimal ordering and shipment policies for vendor and buyer are managed independently. The lot size of purchaser may not result in an optimal policy for the vendor and vice versa. To overcome this disadvantage, researchers have studied the integrated inventory model of vendor and buyer, where the joint total relevant cost for the purchaser as well as the vendor has been optimized. We develop an integrated inventory system consisting of a single vendor and single buyer, where the lot from the vendor is transferred to the buyer in equal-sized batches.
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