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A two-echelon production-inventory model for deteriorating items with multiple buyers

Ghiami, Yousef; Williams, Terry

Authors

Yousef Ghiami

Abstract

In a production-inventory system, the manufacturer produces the items at a rate, e.g. R, dispatches the order quantities to the customers in specific intervals and stores the excess inventory for subsequent deliveries. Therefore each inventory cycle of the manufacturer can be divided into two phases, first is the period of production, the second is when the manufacturer does not do any production and utilises the inventory that is in stock. One of the challenges in these models is how to obtain the inventory level of the supplier when there is deterioration. Previous literature that considers multi-echelon systems (including models with single-buyer or multi-buyer), analyses the deterioration/inventory cost of these echelons with the assumption of having huge surplus in production capacity. Then it seems acceptable to drop part of the production period which is for producing the first batch(s) for buyer(s) at the beginning of each production period. In this paper we develop a single-manufacturer, multi-buyer model for a deteriorating item with finite production rate as few studies have addressed such model. We also relax the assumption on the production capacity and find the average inventory of the supplier. It is shown that in case the production rate is not high, the existing models may not be sufficiently accurate. It is also illustrated that these models are more applicable to inventory systems (and not production- inventory) as they result in fairly accurate solutions when the manufacturer has much higher production capacity compared to the demand rate.

Journal Article Type Article
Publication Date Jan 1, 2015
Journal International journal of production economics
Electronic ISSN 0925-5273
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 159
Issue January
Pages 233-240
Institution Citation Ghiami, Y., & Williams, T. (2015). A two-echelon production-inventory model for deteriorating items with multiple buyers. International journal of production economics, 159(January), (233-240). doi:10.1016/j.ijpe.2014.09.017. ISSN 0925-5273
DOI https://doi.org/10.1016/j.ijpe.2014.09.017
Keywords Deteriorating item, Production-inventory model, Supply chain
Publisher URL http://www.sciencedirect.com/science/article/pii/S0925527314002953
Additional Information This is a description of an article which has been published in: International journal of production economics, 2015, v.159.