An integrated production and inventory model considering reworks and two types of demand simultaneously in a two level supply chain network

Abstract

This study proposed an integrated production and inventory model for multiple items or products considering two types of demand (continuous and discrete demand) and rework process of defect products and disposal in a two level supply chain network consisting of a vendor and a buyer. The multiple items or products are processed and produced in a single facility of the vendor. This model developed is applied for the system consisting of a vendor and a buyer where the vendor produces multiple items and delivers apart of them to the buyer as the discrete demand and others as continuous demand to end customers. During the production time there will be some defect products where apart of them will be reworked to be a good ones and some others will be disposed of. A mathematical model is built to describe the problem studied referred to the basic inventory models. The continuous demand coming from the other customers are served at anytime while the discrete demand from the buyer are served by the vendor using a number of deliveries shipments during the cycle time. The aim of the model developed is to minimize the total operational cost of the supply chain network. The model then is solved by algorithm and optimization methods as solution procedures. A numerical example is given to demonstrate the practical usage of the model and results are discussed. Sensitivity analysis to show the changes of optimal solutions which are affected by the changes of input parameters is also performed. Last, conclusions and potential future research are noted and explained.