Optimizing inventory and sales decisions in a two-stage supply chain with imperfect production and backorders

Rad, Mona Ahmadi; Khoshalhan, Farid; Glock, C. H.

doi:10.1016/j.cie.2014.05.004

Cited by 45 publications

(36 citation statements)

References 44 publications

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“…Possible extensions of this model include an analysis of other factors that has influence on demand, for example, product quality (see, e.g., Rad et al, 2014). If customer demand is sensitive in product quality or environmental aspects, then the supply chain has an incentive to increase the quality of produced items or to reduce environmental pollution to attract additional customers or to be able to charge a higher product price.…”

Section: Discussionmentioning

confidence: 99%

Channel coordination with price discount mechanism under price‐sensitive market demand

Sarkar

Tiwari

Wee

et al. 2019

Int Trans Operational Res

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This paper considers a two-echelon supply chain with single vendor single buyer for trading a single product. The buyer's demand has been assumed to be price-sensitive. We have assumed three-level inspection at the vendor's end in order to maintain good quality of the items delivered to the buyer. We have developed models for both decentralized and centralized scenarios and have determined the optimal solution using the basic concepts of analytic geometry and algebra. In addition, we have proposed a price discount mechanism, where the vendor has provided discounts on the purchase cost to the buyer against the buyer's (increased) order quantity. Finally, in order to illustrate and validate the proposed model, a numerical example and sensitivity analysis is carried out, which has provided some important managerial implications. It has been observed from the numerical study that the proposed price discount policy coordinates the supply chain and has improved the profitability of the supply chain and its members. considering the entire supply chain's profit. However, it seems hypothetical that only a single decision maker has been handling and managing the entire supply chain efficiently. Therefore, to improve the efficiency of a supply chain, significant coordination is required. Hence, achieving effective coordination between the vendor and the buyer has become an important managerial concern as well as an important research issue. To increase sales volume, the vendor often gives efforts that may influence the buyer's behavior. For example, the vendor may offer various discounts so that the buyer orders more than his economic order quantity, which directly maximizes channel profit. Proper demand analysis is another important aspect of improving supply chain profit. Factors such as price of the commodity, after-sales service, advertisement, and quality of the product have been directly influencing market demand of the product. For example, in the telecommunication sector, Apple is well known for its product quality and high price, whereas Samsung and Lenovo are renowned for their new features at relatively lower prices. Customers who prefer quality over cost will naturally go for Apple's products. Similarly, customers who prefer features and lower prices would prefer Samsung or Lenovo products. Product quality depends on the manufacturer's production processes and also on the raw material quality. Therefore, if the manufacturer wants to produce high-quality products, both manufacturing process and raw material quality play an important role. However, higher quality components may involve higher prices. It is, therefore, necessary to make a balance between price and quality in order to optimize the profit. In this study, we have incorporated price dependency of demand into our supply chain model. The production-delivery supply chain models have often assumed that the quality of product is constantly perfect. However, in practice, this assumption for any production model is rarely satisfied as a production system ofte...

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Section: Discussionmentioning

confidence: 99%

Channel coordination with price discount mechanism under price‐sensitive market demand

Sarkar

Tiwari

Wee

et al. 2019

Int Trans Operational Res

View full text Add to dashboard Cite

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“…In practice, market demand depends on certain factors, such as selling price, time, advertising effort, etc. A detailed explanation of these items can be found in Rad et al [43], and Aust and Buscher [44,45]. For our problem, the demand rate in the deterministic environment is modeled as f (t, a, p) = (D 0 + µa − bp)e λt , where D 0 (> 0) is the market scale parameter, and µ, b and λ measure the influence of the retailer's effort, selling price and the time on demand, respectively.…”

Section: Notations and Assumptionsmentioning

confidence: 99%

Coordinating a supply chain for deteriorating items with multi-factor-dependent demand over a finite planning horizon

Bai

et al. 2016

Applied Mathematical Modelling

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Coordinating a supply chain for deteriorating items with multi-factor-dependent demand over a finite planning horizon, Applied Mathematical Modelling (2016), Highlights• We prove the lower bound on penalty for decentralization.• We propose a revised revenue-sharing (RRS) contract to coordinate the developed system.• The RRS contract always yields a higher profit than the revenue-sharing (RS) contract.• Under these two contracts, the optimal conditions of attaining a win-win outcome are derived. AbstractThe paper considers a one-manufacturer and one-retailer supply chain for deteriorating items over a finite planning horizon. For the case with multi-factor-dependent demand, we analyze the coordination of the system within a contract mechanism. We first formulate and then compare a decentralized model and a centralized model; following this, we propose a revenue-sharing contract and a revised revenue-sharing contract to coordinate the decentralized supply chain. We illustrate the proposed models with a numerical example and sensitivity analysis of the coordination results on several key parameters. The results show that the supply chain's profit in the centralized system increases by at least 1 3 , both contracts can coordinate the system and the fraction parameter of the revenue exists when each contract is acceptable to both members of the supply chain, and the revised revenue-sharing contract always yields a higher profit than the revenue-sharing contract. Furthermore, the supply chain's profit under the revised revenue-sharing contract is shown to be equivalent to that in the centralized system.

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“…Hsu and Hsu [6] derive an EOQ inventory model with imperfect quality items, inspection errors, shortage backordering, and sales returns. Rad et al [19] propose an EOQ inventory model that combines operations and pricing decisions in a two-stage supply chain when the demand rate is dependent on the price, and shortage is permitted. Moussawi-Haidar et al [12] investigate the effect of deterioration on the instantaneous replenishment.…”

Section: Introductionmentioning

confidence: 99%

Replenishment of imperfect items in an EOQ inventory model with partial backordering

2020

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This paper deals with an inventory model in which a percent of the items in the lot is imperfect. The supplier is far from the buyer. After the reception of the order, immediately the products are inspected and imperfect items are identified. Due to the fact that supplier is located at long distance and the demand is needed to cover, the imperfect items are replenished by perfect ones from a local supplier at higher cost. In addition, the imperfect items are withdrawn and sold at a salvaged price as second-degree items. The shortage is allowed and partially backordered. The following three cases are considered: Case I. The reordered items are received when inventory level is zero; Case II. The reordered items are received when the backordered quantity is equal to the imperfect items quantity; and Case III. The reordered items are received when shortage is still remained. These cases are studied and analyzed in detail. In each case, the aim is to obtain the optimal value of the length period and the percent of period duration in which the inventory level is positive. A numerical example is presented to show the applicability of proposed inventory model. The results show that Case I has the lowest holding and shortage cost, so the total benefit is higher than the other two cases.Mathematics Subject Classification. 90B05, 90C30.

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Optimizing inventory and sales decisions in a two-stage supply chain with imperfect production and backorders

Cited by 45 publications

References 44 publications

Channel coordination with price discount mechanism under price‐sensitive market demand

Channel coordination with price discount mechanism under price‐sensitive market demand

Coordinating a supply chain for deteriorating items with multi-factor-dependent demand over a finite planning horizon

Replenishment of imperfect items in an EOQ inventory model with partial backordering

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