An integrated inventory model for multi-echelon supply chains with deteriorating items: a price-dependent demand approach

ABSTRACT

This study develops an operational policy for a three-echelon supply chain. A mathematical programming model is proposed to maximize the combined profit of the suppliers, manufacturers, and distributors. The model is developed under the supply chain management paradigm, which highlights the cooperation of all the nodes along the supply chain to improve performance criteria like total profit. We take into account the deteriorating nature of raw materials and final products. The proposed model was then applied to a real-world case of an Iranian supply chain active in the detergent production industry using its historical data for parameters. The model was solved using GAMS. Results indicate that the integrated approach was able to increase the supply chain’s total profit by 15%. Sensitivity analysis also showed that variable costs of final products are high, leaving a shallow margin. Other managerial insights are also drawn from results.

KEYWORDS:

• Supply chain management
• inventory control
• deteriorating items
• mathematical programming
• price-dependent demand

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Notes on contributors

Mohammadreza Taghizadeh-Yazdi

Mohammadreza Taghizadeh-Yazdi is currently an associate professor in the Department of Industrial Management at University of Tehran, Iran. He received his M.S. degree in Department of Industrial Engineering and Ph.D. degree in Department of Industrial Management from University of Tehran. His research fields include Operations Research, Simulation, Simulation-based Optimization, Supply Chain Management.

Zahra Farrokhi

Zahra Farrokhi received her M.S. degree in Department of Industrial Management from University of Tehran, Iran. Her research fields include operations research and mathematical modeling.

Abdolkarim Mohammadi-Balani

Abdolkarim Mohammadi-Balani is a Ph.D. student in the Department of Industrial Management at Tarbiat Modares University, Iran. He received his M.S. in Department of Industrial Management from University of Tehran. His research activities include Simulation-based optimization, supply chain management, and multiple criteria deicion-making.