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The effect of human errors on an integrated stochastic supply chain model with setup cost reduction and backorder price discount

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  • Tiwari, Sunil
  • Kazemi, Nima
  • Modak, Nikunja Mohan
  • Cárdenas-Barrón, Leopoldo Eduardo
  • Sarkar, Sumon

Abstract

This study develops an integrated vendor–buyer inventory model for a supply chain where quality issues and human error affect its coordination. Each lot shipped to the buyer contains defective items, with a rate which randomly changes from a lot to the other. The buyer inspects every shipped lot to segregate defective items. However, the inspection process at the buyer’s end goes wrong in the classification of defective and non-defective items. On the other hand, the buyer may run out of inventory, but in order to avoid lost sales, he/she offers a price discount on the backlogged items to his/her customers. Due to the vendor-buyer relationship, the buyer invests in reducing the setup cost of the vendor. Supply chain’s lead-time is considered variable, and two models are developed based on the probability distribution of the lead-time demand. In the first model, it is assumed that lead-time demand follows a normal distribution, while in the latter one, it does not follow any certain distribution. Two models are developed to determine the joint optimal decision variables that minimize the total cost of the supply chain. Two iterative algorithms are developed to obtain the optimal solution for both models. A set of numerical analysis and sensitivity analysis are conducted to gain insights.

Suggested Citation

  • Tiwari, Sunil & Kazemi, Nima & Modak, Nikunja Mohan & Cárdenas-Barrón, Leopoldo Eduardo & Sarkar, Sumon, 2020. "The effect of human errors on an integrated stochastic supply chain model with setup cost reduction and backorder price discount," International Journal of Production Economics, Elsevier, vol. 226(C).
    • Handle: RePEc:eee:proeco:v:226:y:2020:i:c:s092552732030044x
    DOI: 10.1016/j.ijpe.2020.107643
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    3. Bikash Koli Dey & Hyesung Seok, 2024. "Intelligent inventory management with autonomation and service strategy," Journal of Intelligent Manufacturing, Springer, vol. 35(1), pages 307-330, January.
    4. Sumon Sarkar & Sunil Tiwari & B. C. Giri, 2022. "Impact of uncertain demand and lead-time reduction on two-echelon supply chain," Annals of Operations Research, Springer, vol. 315(2), pages 2027-2055, August.
    5. Sumon Sarkar & Bibhas C. Giri, 2022. "Safety stock management in a supply chain model with waiting time and price discount dependent backlogging rate in stochastic environment," Operational Research, Springer, vol. 22(2), pages 917-946, April.
    6. R. Uthayakumar & B. Karthick, 2023. "Analysis of several reduction strategies on a two-echelon sustainable supply chain model with triangular fuzzy demand," OPSEARCH, Springer;Operational Research Society of India, vol. 60(1), pages 393-419, March.

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