ECONOMIC REPLENISHMENT PLAN WITH IMPERFECT PRODUCTION PROCESS AND BUSINESS-RETURN DEPENDENT DEMAND

Abstract

This study considers the supplier's warranty return and the buyer's rebate policy as business-return policy in the supplier–buyer supply chain. The policy as well as the displayed stock level influences the behavior of the buyer. Distinct from the traditional single-stage inventory model, we investigate a two-stage replenishment policy model for deteriorating item considering the effect of imperfect production process, product design, stock level and business-return. A mathematical model utilizing the time weighted inventory (TWI) approach and two-variables fixed point optimization technique is developed to derive the optimal inspection starting time, the number of deliveries, the optimal delivery-time interval and the optimal business-return period. A numerical example is presented to illustrate the model developed. The result shows that the fixed demand rate, the unit holding cost and the unit inspection cost are the critical factors affecting the scheduling and performance of the two-stage supply chain.