An optimal production and shipment policy for a single-vendor single-buyer integrated system with both learning effect and deteriorating items

Abstract

The collaboration of vendor and buyer is one of the key factors for successful supply chain management. The most common strategy for a collaborative system is to propose an integrated replenishment plan aimed at maintaining a win-win partnership for both vendor and buyer. The objective of this study is to develop a production and shipment model for a system that incorporates learning effect and deteriorating items and to derive an optimal joint total cost from the integrated perspective of both vendor and buyer. A simple solution procedure is presented to determine the optimal production time and number of deliveries. A numerical example is provided to illustrate the proposed model. A sensitivity analysis is conducted to study the effect of changes in the related parameters on the optimal solution. This paper shows that the proposed integrated model can result in a significant cost reduction as compared with the independent decisions made by either vendor or buyer.

Keywords:

• inventory
• integrated model
• supply chain management
• learning effect
• deteriorating items

Acknowledgements

The author would like to thank the anonymous referees for their constructive comments and helpful suggestions. He also acknowledges the support of the National Science Council of the Republic of China under Contract No. NSC 98-2221-E-020-021.