Abstract
Article history: Received August 31 2015 Received in Revised Format Septmber 26 2015 Accepted December 2 2015 Available online December 7 2015 For the past four decades the integrated vendor and buyer supply chain inventory model has been an interesting topic, but quality improvement of defective items in the integrated inventory model with backorder price discount involving controllable lead time has been rarely discussed. The aim of this paper is to minimize the total related cost in the continuous review model by considering the order quantity, reorder point, lead time, process quality, backorder price discount and number of shipment as decision variables. Moreover, we assume that an investment function is used to improve the process quality. The lead time demand follows a normal distribution. In addition, the buyer offers backorder price discount to motivate the customers for possible backorders. There are some defective items in the arrival lot, so its treatment is also taken in account in this paper. We develop an iterative procedure for finding the optimal values of decision variables and numerical example is presented to illustrate the solution procedure. Additionally, sensitivity analysis with respect to major parameters is also carried out. © 2016 Growing Science Ltd. All rights reserved
Highlights
In the classical inventory models, it is often seen that the setup/ordering cost and lead time are constant and not subject to control
We develop an iterative procedure for finding the optimal values of decision variables and numerical example is presented to illustrate the solution procedure
The first papers dealing with a variable lead time in an inventory model was provided by Liao and Shyu (1991). They assumed that lead time can be decomposed into several components, each having a different piecewise linear crashing cost function for lead time reduction, and that each component may be reduced to a given minimum duration
Summary
In the classical inventory models, it is often seen that the setup/ordering cost and lead time are constant and not subject to control. Pan and Hsiao (2005) presented integrated supply chain inventory model with controllable lead time and backorder price discount to reduce lost sales. By discussing both normal distribution model and distribution-free model In this paper, they allowed order quantity, reorder point and lead time as decision variables in conjunction with setup cost. Sarkar et al (2015) discussed about two models, first model with normally distributed lead time demand and the second model without any specific distribution with known mean and standard deviation They minimized the total expected cost with order quantity, reorder point, backorder price discount, process quality, and lead time as decision variables.
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