An integrated production and inventory model for a system comprising an assembly supply chain and a distribution network

Abstract

This study investigates the production and inventory problem for a system comprising an assembly supply chain and a distribution network. A uniform lot size is produced uninterruptedly with a single setup at each production stage. Equal-sized batch shipment policy is applied to the whole system and the number of batches can be varied. All retailers have agreed on a joint replenishment policy with a common replenishment cycle. The objective is to determine the optimal common replenishment cycle, the number of batches of each production stage and retailer, all of which minimises the integrated total cost. Moreover, a new concept is introduced; namely, critical replenishment cycle. The replenishment cycle division (RCD) and recursive tightening (RT) methods are then developed to obtain the optimal solutions to the subject problem. Two theorems are verified to ensure the solutions obtained by the RCD and RT methods reaching the global optimum. An example is presented to illustrate the procedures involved in the RCD and RT methods.