What should be the best retail strategy to deal with an unequal shipment from an unreliable manufacturer?

Abstract

Unreliability of the manufacturer is a challenging issue for a retailer in order to provide service to consumers and meet the market demand. Due to the unreliability of the manufacturer, the lead time increases, causing shortages. In turn, the retailer faces huge shortages and losses. The lead time can be minimized by reducing the flow time during work-in-process. To reduce the holding cost of the retailer under an increasing demand, the single-setup-multi-unequal-increasing-delivery is introduced by the unreliable manufacturer. But delivered products to the retailer variable demand are lower in volume than the ordered products. Due to the variable demand that is selling price and service dependent, the number of shipments during transportation increases for the single-setup-multi-unequal-increasing-delivery policy. The main goal of this research is to manage unequal shipments from the unreliable manufacturer for gaining more profit. The stochastic optimization approach is considered for the analytical solution. The quasi-closed-form solution is determined for the decision variables of the model. The study is illustrated both numerically and graphically. Results prove that the retailer can still control the profit if the manufacturer can reduce the flow time of the production and maintain a perfect retailing strategy. The research shows that the single-setup-multi-unequal-increasing-delivery policy is 1.14% more profitable than the single-setup-multi-delivery policy, and 8.53% more profitable than the single-setup-single-delivery policy.