Effects of joint replenishment and channel coordination for managing multiple deteriorating products in a supply chain

Abstract

This paper deals with an area of emerging research: managing a multi-product and multi-echelon supply chain, which produces, distributes, and sells deteriorating goods in the marketplace. Conventional wisdom suggests that channel coordination and workflow collaboration, between upstream and downstream entities, are promising mechanisms to achieve a cost-effective supply chain. In a multi-product situation, greater savings can be realized by coordinating the replenishment of various items in a distribution channel. This is due, in large part, to the fact that various cost components, such as setup and transportation costs, are often jointly incurred between several distinct items. This paper attempts to integrate the three streams of, as yet, rather disjointed research works: namely joint replenishment programmes; channel coordination; and deteriorating goods management. Under a structured framework, four cost models were developed, with key assumptions related to time-proportional demand and exponentially decaying deterioration rates. These models, representing various replenishment and production policies, offer qualitative insights into the interplay between channel coordination and joint replenishment mechanisms.

Keywords:

• inventory
• logistics
• production
• channel coordination
• joint replenishment
• deterioration