Abstract
This project focuses on two-level closed-loop supply chains with defective items. The objective of this project is to develop and design a model that minimizes the total expected cost per unit time, which includes set-up costs, holding costs, transportation/shipping costs, and screening costs of the integrated two-level close-loop supply chain. The model also finds the optimum order size and optimum number of shipments. The buyer screens the products received from the vendor to find the defective items. The holding costs of the defective items at the buyer's end is paid by the vendor. After the screening process, the defective items are shipped back to the vendor and the vendor has to carry the shipping costs of the defective items. Two scenarios may arise: where both the vendor and buyer are domestic or international, where vendor and buyer are located in two different countries. In the case of an international supply chain, exchange rate between two countries has also been considered. In current world since the business growing fast, the inventory management of any business enterprise improving their performance financially by minimizing the holding cost. The analysis shows how the percentage of defective item affects the total expected cost. The project work has an important involvement for improvement in the vendor-buyer correlated high-tech supply chain industries.
Highlights
The inventory management control model was introduced in the earliest decades and this led many researchers to work on economic order quantity (EOQ) for real life situations
The analysis confirms the effect of defective items in a twolevel closed-loop supply chain for a single vendor and single buyer increase the expected total cost and order size
The economic order quantity (EOQ) model assumes all the items are produced without defective items
Summary
Unit stock holding cost per item per year for the vendor Unit stock holding cost per item per year for buyer Expected annual total integrated cost of the supply chain Demand Size of each shipment from the vendor to the buyer Production rate Setup cost for vendor per production run Setup cost for buyer per order The number of shipments Time interval between delivery Screening time Fixed transportation cost per shipment Variable transportation cost Percentage of defective items (random variable) Probability density function of Y Screening rate (Q/t) Unit screening cost Exchange rate
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