Transnational companies, operating in extremely competitive global markets, always seek to lower different operating costs, such as inventory holding costs in their intra- supply chain system. This paper incorporates a cost reducing product distribution policy into an intra-supply chain system with multiple sales locations and quality assurance studied by [Chiu et al., Expert Syst Appl, 40:2669–2676, (2013)]. Under the proposed cost reducing distribution policy, an added initial delivery of end items is distributed to multiple sales locations to meet their demand during the production unit’s uptime and rework time. After rework when the remaining production lot goes through quality assurance, n fixed quantity installments of finished items are then transported to sales locations at a fixed time interval. Mathematical modeling and optimization techniques are used to derive closed-form optimal operating policies for the proposed system. Furthermore, the study demonstrates significant savings in stock holding costs for both the production unit and sales locations. Alternative of outsourcing product delivery task to an external distributor is analyzed to assist managerial decision making in potential outsourcing issues in order to facilitate further reduction in operating costs.

This paper presents a two-phase algebraic approach for jointly determining the lot size and delivery policy in a vendor-buyer integrated system with rework. Conventional method uses the diff erential calculus for solving production-shipment problem with the need for proving optimality fi rst on the system cost function. This study proposes a two-phase algebraic solution procedure to derive the optimal lot size as well as optimal number of deliveries without using derivatives. The proposed approach enables practitioners who maybe without suff icient knowledge of calculus to understand such a specifi c real world problem with ease.Keywords: Production-shipment policy, operations management, algebraic approach, rework determine the optimal replenishment batch size that minimizes total production-inventory costs. The EPQ model considers the production