Developing an Economic Production Quantity Model in Integrated and Non-integrated Three-Layer Supply Chains with an Optimal Inventory Control Policy

Abstract

This paper develops an economic production quantity model in a three-layer supply chain with two different structures. This chain composes of a supplier, a manufacturer, and multiple retailers. In this chain, the supplier transforms raw material to the semi-finished product, and sends them to the manufacturer. Then, the manufacturer transmutes them to the finished product, and delivers them to the retailers to satisfy market demand. The retailers replenish their inventory at the same time. The demand of each retailer is different due to essence of various demand customers, and according to the decisions of the chain’s members, two structures of non-integrated and integrated supply chains are surveyed. In this paper, we will employ the Stackelberg approach to solve the presented models. The ordering cycle of retailers is the decision variable of the model. The main aim of this study is to develop an inventory and production model in three-layer supply chains to minimize the total cost of chain by utilizing the optimal inventory control policy. At last, numerical examples are presented for each structure of supply chains.