Integrated logistic and inventory model for a two-stage supply chain controlled by the reorder and shipping points with sharing information

Abstract

This study investigated the integrated stochastic inventory problem for a two-stage supply chain consisting of a single retailer and a single supplier. By using batch shipment policy, the expected total cost can be significantly reduced. Equally sized batch shipment models, controlled by both the reorder and the shipping points with sharing information, variable safety factors, are constructed. The problem is solved optimally by the proposed algorithms that determine the economic lot size, the optimal batch sizes, number of batches, and safety factor. A numerical example is included to illustrate the algorithmic procedures and to prove that the model controlled both by the reorder and by the shipping points is superior to the classic model controlled only by the reorder point. Sensitivity analyses are performed to analyze the effect of primary parameters on the lot size, number of batches, safety factor, and expected total cost.