Inventory and sales decisions in a vendor–buyer system with imperfect items and learning in inspection

ABSTRACT

In this study, we propose a joint economic lot-sizing model to include learning process along with errors in inspection and full backordering system. We aim to study pricing and inventory decisions in a two-level supply chain involving a single vendor and a single buyer in which the demand is sensitive to price and company’s advertisement efforts. The mathematical inventory model is developed analytically and solved using a proposed algorithm. The objective of the model is to maximise joint total profit by simultaneously determining optimal shipment size, number of deliveries, backorder quantity and product selling price. A numerical example is provided to show the application of the model and to investigate the impact of key parameter’s changes on model behaviour. By comparing the integrated/centralised model to the independent/decentralised model, we note that the integrated/centralised model provides better profit to the system, along with lower selling price and smaller amount of backorder.

KEYWORDS:

• Lot sizing
• inventory model
• supply chain
• learning
• inspection error
• sensitive demand
• full backorder

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Wakhid Ahmad Jauhari

Wakhid Ahmad Jauhari is currently a lecturer in the Industrial Engineering Department, Universitas Sebelas Maret and a senior researcher in Production System Laboratory, Universitas Sebelas Maret, Surakarta, Indonesia. His research’s interests include modelling inventory, supply chain management, energy management and manufacturing design. He has published more than 80 articles in international journals and proceedings, including Operations Research Perspectives, Journal of Industrial Engineering International, Energy System, Production and Manufacturing Research, Journal of Industrial Engineering and Management, International Transactions on Electrical Energy System, Advances in Operation Research, Cogent Engineering, International Journal of Logistics and Systems Management, International Journal of Operational Research and International Journal of Procurement Management.

Diah Ayu Purnasari

Diah Ayu Purnasari is a junior researcher in Production System Laboratory of Universitas Sebelas Maret. She received her Bachelor of Industrial Engineering also from the Universitas Sebelas Maret, Indonesia. Her research interests are operations research, production management, logistic and inventory modelling.

Cucuk Nur Rosyidi

Cucuk Nur Rosyidi is a professor in Industrial Engineering Department of Universitas Sebelas Maret. He received doctoral degree in 2010 from Industrial Engineering Department of Institut Teknologi Bandung. Currently he is the head of Production System Laboratory and also serves as the Chief at Center for Research in Manufacturing Systems (CRiMS), a Research Group at Faculty of Engineering Universitas Sebelas Maret which focuses on the research of problem solving and mathematical modelling in make or buy decision, inventory management, quality engineering, product design and development, and other related research.