Instant production-replenishment and coordination mechanism for short life cycle and deteriorating item with stock-dependent demand

ABSTRACT

This article studies one kind of special make-to-order production-inventory system consisted of one manufacturer and one retailer for short-life cycle and deteriorating item with dynamic stock-dependent demand. We address the problem by constructing two types of decision models to obtain the best inventory replenishment policy under centralised and decentralised circumstances, respectively. In order to improve the decision effect of decentralised decision, a quantity discount contract is applied to obtain the equilibrium wholesale price and order quantity. A case example is used to illustrate the applications of the proposed models and the effects of some parameters on the optimal policy and supply chain performance. The results verify that deterioration rate has significant impact on ordering decision but little influence on the pricing decision. With the coordination of quantity discount contract, both the manufacture and the retailer can make profit increase, but the increase proportion of the manufacturer is more than that of the retailer. The manufacturer benefits more from the coordination contract.

KEYWORDS:

• Instant production-replenishment
• inventory
• deteriorating item
• stock-dependent demand
• quantity discount contract
• coordination

Acknowledgments

The authors would like to thank the anonymous referees and the editor for their useful suggestions and insightful comments. This work is supported by the National Natural Science Foundation of China (No. 71372154).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

National Natural Science Foundation of China [grant number 71372154].