Two-echelon production-inventory system with fuzzy production rate and promotional effort dependent demand

Abstract

Intelligent manufacturing design of a complex production-inventory system becomes a key issue for the organization of responsiveness to uncertainties. This paper addresses a two-echelon production-inventory model for a non-repairable product where the system consists of single manufacturer and single retailer. The manufacturer procures raw material (which also contains imperfect raw materials) from an outside supplier then proceeds to convert perfect-quality raw material as a finished product, and finally delivers to the retailer. In this study we assume that the demand is sensitive to promotional efforts/sales teams' initiatives and the production rate is uncertain but possible to describe with a triangular fuzzy number. Then we use the signed distance method to defuzzify the fuzzy joint total cost and an analytical method is employed to achieve the optimal solutions so that the total costs of both manufacturer and retailer are minimized. An efficient algorithm is developed to design an intelligent manufacturing strategy such as optimal production lot-size, backlogging and the initiatives of sales teams. A numerical example and sensitivity analysis are given to demonstrate the application of the proposed model.