Abstract
A B S T R A C T In the current global economic scenario, inflation plays a vital role in deciding optimal pricing of goods in any business entity. This paper develops a two-echelon (manufacturer-buyer) supply chain model taking into account inflation and time value of money. The present value of the total cost of the supply chain is derived when the manufacturer produces a number of lots, the sum of which is equal to the buyer's total demand over a finite time horizon and the manufacturer's each production lot is delivered to the buyer in n shipments. The optimal solution of the model is obtained for a numerical example after some adjustments (required to exhibit feasibility) in the derived solution. Sensitivity analysis is also carried out in order to examine the effects of changes in model-parameters on the optimal solution.
Highlights
Chain management has been the topic of interest to many Operations Research/Management Science researchers quite for a long time
In the case of a single-vendor single-buyer supply chain, the idea of optimizing the joint total cost was introduced by Goyal (1976)
Goyal (1995) developed a model where successive shipment sizes increase by a ratio equal to the production rate divided by the demand rate
Summary
Chain management has been the topic of interest to many Operations Research/Management Science researchers quite for a long time. Lu (1995) specified the optimal production and shipment policies when the shipment sizes are equal He relaxed the assumption of completing a whole batch before starting shipment proposed by Goyal (1988). Goyal (1995) developed a model where successive shipment sizes increase by a ratio equal to the production rate divided by the demand rate He derived an expression for the optimal first shipment size as a function of the number of shipments. Misra (1979b) and Chandra and Bahner (1985) developed models to investigate the effects of inflation and time value of money on optimal ordering policies. Datta and Pal (1991) developed a model with linear time-dependent demand and shortages to investigate the effects of inflation and time value of money on a finite horizon policy.
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