Integrated inventory control with recovery and disposal

Abstract

This paper deals with a cooperative process between the vendor and the buyer in an integrated production inventory model. The buyer inspects all the arriving items and returns all of the defective items to the vendor. The vendor recycles every defective item; all recoverable items are repaired and then sold to the third-party buyers. In this paper, the first scenario discussed, the vendor has a superior bargaining power over the buyer, and in the second, the buyer has a better bargaining power. For each scenario, a method is used for finding an optimal strategy. Furthermore, in the leader–follower cooperative game, we develop three algorithmic procedures to find the minimum expected annual total cost for each model. Simultaneously, we optimise the order quantity of the buyer, the length of lead time of the buyer, the size of shipments from the vendor to the buyer and the numbers of shipments per production run from the vendor to the buyer for this integrated inventory model. Finally, the expected annual total costs of the models are compared to determine the managerial implications of results.