Abstract
Article history: Received 1 July 2010 Received in revised form 2 October 2010 Accepted 4 October 2010 Available online 4 October 2010 This article develops a supply chain coordination model with a single-vendor and a singlebuyer. The vendor manufactures the product in lots and delivers to the buyer in equal shipments. The vendor’s production process is not perfectly reliable. During a production run, the process may shift from an in-control state to an out-of-control state at any random time and produces some defective items. The buyer whose demand is assumed to be a linear function of the on-hand inventory performs a screening process immediately after each replenishment. Moreover, the buyer’s inventory is deteriorated at a constant rate over time. The vendor-buyer coordination policy is determined by minimizing the average cost of the supply chain. It is observed from the numerical study that channel coordination earns significant cost savings over the non-coordinated policy. © 2011 Growing Science Ltd. All rights reserved.
Highlights
The strategic coordination between vendor and buyer has become one of the key issues in today’s supply chain management
The vendor has to decide the economic production lot size and the optimal number of shipments to deliver the quantities to the buyer
One of the first works dealing with integrated vendorbuyer model is due to Goyal (1976) who developed a simple supply chain model of single vendor and single customer and their co-ordination
Summary
The strategic coordination between vendor (supplier) and buyer (retailer) has become one of the key issues in today’s supply chain management. (1999) derived a structure of the globally optimal batching and shipping policy for the single-vendor single-buyer integrated production inventory problem. Zhou et al (2008) addressed a twoechelon supply chain coordination model with one manufacturer and one retailer where the demand for the product at the retailer is dependent on the on-hand inventory. They developed the model when the manufacture follows a lot-for-lot policy. The objective of the study is to determine the optimal number of shipments from the vendor to the buyer and the optimal order size of the retailer in each replenishment so that the total cost of the supply chain is minimized.
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