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Joint optimization of price, replenishment frequency, replenishment cycle and production rate in vendor managed inventory system with deteriorating items

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  • Taleizadeh, Ata Allah
  • Noori-daryan, Mahsa
  • Cárdenas-Barrón, Leopoldo Eduardo

Abstract

This paper develops a Vendor Managed Inventory (VMI) model for a two-level supply chain comprised of one vendor and several non-competing retailers in which both the raw material and the finished product have different deterioration rates. It is assumed that the market demand for the finished product is deterministic and price sensitive. The proposed inventory model optimizes the retail price, the replenishment frequency of raw material, the replenishment cycle of the product, and the production rate jointly with main objective of maximizing the total profit of the entire chain. In the development of the inventory model the Stackelberg approach is considered between the chain partners where the vendor is leader and the retailers are the followers. Moreover, the concavity of the profit functions is proven and based on this a solution algorithm is developed to find the optimal solutions. At the end, a numerical example is provided to illustrate the use of the production–inventory model and perform a sensitivity analysis. Finally, some conclusions and future research directions are proposed.

Suggested Citation

  • Taleizadeh, Ata Allah & Noori-daryan, Mahsa & Cárdenas-Barrón, Leopoldo Eduardo, 2015. "Joint optimization of price, replenishment frequency, replenishment cycle and production rate in vendor managed inventory system with deteriorating items," International Journal of Production Economics, Elsevier, vol. 159(C), pages 285-295.
  • Handle: RePEc:eee:proeco:v:159:y:2015:i:c:p:285-295
    DOI: 10.1016/j.ijpe.2014.09.009
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    References listed on IDEAS

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    1. Prasenjit Pramanik & Manas Kumar Maiti & Manoranjan Maiti, 2018. "An appropriate business strategy for a sale item," OPSEARCH, Springer;Operational Research Society of India, vol. 55(1), pages 85-106, March.
    2. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    3. Ilkyeong Moon & Yoon Jea Jeong & Subrata Saha, 2020. "Investment and coordination decisions in a supply chain of fresh agricultural products," Operational Research, Springer, vol. 20(4), pages 2307-2331, December.
    4. Appelbaum, Deniz & Kogan, Alexander & Vasarhelyi, Miklos & Yan, Zhaokai, 2017. "Impact of business analytics and enterprise systems on managerial accounting," International Journal of Accounting Information Systems, Elsevier, vol. 25(C), pages 29-44.
    5. Shima Shafiee-Gol & Mohammad Mahdi Nasiri & Ata Allah Taleizadeh, 2016. "Pricing and production decisions in multi-product single machine manufacturing system with discrete delivery and rework," OPSEARCH, Springer;Operational Research Society of India, vol. 53(4), pages 873-888, December.
    6. Bai, Qingguo & Gong, Yeming (Yale) & Jin, Mingzhou & Xu, Xianhao, 2019. "Effects of carbon emission reduction on supply chain coordination with vendor-managed deteriorating product inventory," International Journal of Production Economics, Elsevier, vol. 208(C), pages 83-99.
    7. Taleizadeh, Ata Allah & Shokr, Iman & Konstantaras, Ioannis & VafaeiNejad, Mahyar, 2020. "Stock replenishment policies for a vendor-managed inventory in a retailing system," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    8. Ata Allah Taleizadeh & Elham Haji-Sami & Mahsa Noori-daryan, 2020. "A robust optimization model for coordinating pharmaceutical reverse supply chains under return strategies," Annals of Operations Research, Springer, vol. 291(1), pages 875-896, August.
    9. Glock, Christoph H. & Grosse, Eric H., 2021. "The impact of controllable production rates on the performance of inventory systems: A systematic review of the literature," European Journal of Operational Research, Elsevier, vol. 288(3), pages 703-720.
    10. Noori-Daryan, Mahsa & Taleizadeh, Ata Allah & Jolai, Fariborz, 2019. "Analyzing pricing, promised delivery lead time, supplier-selection, and ordering decisions of a multi-national supply chain under uncertain environment," International Journal of Production Economics, Elsevier, vol. 209(C), pages 236-248.
    11. Ahmed Abdel-Aleem & Mahmoud A. El-Sharief & Mohsen A. Hassan & Mohamed G. El-Sebaie, 2017. "A surface response optimization model for EPQ system with imperfect production process under rework and shortage," OPSEARCH, Springer;Operational Research Society of India, vol. 54(4), pages 735-751, December.
    12. Lin, Feng & Jia, Tao & Wu, Feng & Yang, Zhen, 2019. "Impacts of two-stage deterioration on an integrated inventory model under trade credit and variable capacity utilization," European Journal of Operational Research, Elsevier, vol. 272(1), pages 219-234.
    13. Fauza, Gusti & Amer, Yousef & Lee, Sang-Heon & Prasetyo, Hari, 2016. "An integrated single-vendor multi-buyer production-inventory policy for food products incorporating quality degradation," International Journal of Production Economics, Elsevier, vol. 182(C), pages 409-417.
    14. Adeinat, Hamza & Ventura, José A., 2015. "Determining the retailer's replenishment policy considering multiple capacitated suppliers and price-sensitive demand," European Journal of Operational Research, Elsevier, vol. 247(1), pages 83-92.
    15. Nikunja Mohan Modak & Shibaji Panda & Shib Sankar Sana & Tahir Nisar, 2015. "Managing a two-echelon supply chain with price, warranty and quality dependent demand," Cogent Business & Management, Taylor & Francis Journals, vol. 2(1), pages 1011014-101, December.
    16. Zhang, Jianxiong & Liu, Guowei & Zhang, Qiao & Bai, Zhenyu, 2015. "Coordinating a supply chain for deteriorating items with a revenue sharing and cooperative investment contract," Omega, Elsevier, vol. 56(C), pages 37-49.
    17. Ata Allah Taleizadeh & Kannan Govindan & Nasim Ebrahimi, 2020. "The effect of promotional cost sharing on the decisions of two-level supply chain with uncertain demand," Annals of Operations Research, Springer, vol. 290(1), pages 747-781, July.
    18. Arpita Roy & Shib Sankar Sana & Kripasindhu Chaudhuri, 2018. "Optimal Pricing of competing retailers under uncertain demand-a two layer supply chain model," Annals of Operations Research, Springer, vol. 260(1), pages 481-500, January.
    19. Chen, Zhixiang, 2018. "Optimization of production inventory with pricing and promotion effort for a single-vendor multi-buyer system of perishable products," International Journal of Production Economics, Elsevier, vol. 203(C), pages 333-349.
    20. Ata Allah Taleizadeh & Mahsa Noori-daryan & Kannan Govindan, 2016. "Pricing and ordering decisions of two competing supply chains with different composite policies: a Stackelberg game-theoretic approach," International Journal of Production Research, Taylor & Francis Journals, vol. 54(9), pages 2807-2836, May.
    21. Eksler, Leonid & Aviram, Roei & Elalouf, Amir & Kamble, Aakash, 2018. "An EOQ model for multiple products with varying degrees of substitutability," Economics Discussion Papers 2018-77, Kiel Institute for the World Economy (IfW).
    22. Bhaskar Bhaula & Jayanta Kumar Dash & M. Rajendra Kumar, 2019. "An optimal inventory model for perishable items under successive price discounts with permissible delay in payments," OPSEARCH, Springer;Operational Research Society of India, vol. 56(1), pages 261-281, March.
    23. Al-Amin Khan, Md. & Shaikh, Ali Akbar & Konstantaras, Ioannis & Bhunia, Asoke Kumar & Cárdenas-Barrón, Leopoldo Eduardo, 2020. "Inventory models for perishable items with advanced payment, linearly time-dependent holding cost and demand dependent on advertisement and selling price," International Journal of Production Economics, Elsevier, vol. 230(C).
    24. Chen, Zhixiang, 2019. "Reprint of “Optimization of production inventory with pricing and promotion effort for a single-vendor multi-buyer system of perishable products”," International Journal of Production Economics, Elsevier, vol. 209(C), pages 285-301.

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