The effect of working environment aspects on a vendor–buyer inventory model

Abstract

Working Environment (WE) refers to all working conditions that influence a workplace and related human health. Human beings are critical resources of competitive advantage that improve a company's performance. A detrimental “WE” causes occupational illnesses and fatigue that reduce work quality. Since humans are involved in all stages of operations in companies, this health–related performance loss can negatively impact the performance of inventory systems. Despite its importance, surprisingly WE–related performance losses have not been investigated in a supply chain context. This paper, therefore, integrates WE design into a two–level (vendor–buyer) supply chain and investigates its effect on production and inventory decisions. A poor WE design increases workers' errors that generate defective items, which subsequently deteriorates the performance (total cost) of an inventory system. Better WE conditions improve system performance as a result of more efficient production and inventory policy.