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Optimal production and inventory decisions for supply chains with one producer and multiple newsvendors

Author

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  • Majid M. Aldaihani
  • M.A. Darwish

Abstract

This paper considers a supply chain with a single manufacturer supplying a newsvendor-type item to multiple retailers (newsvendors). The manufacturer produces the item in batches at a finite rate and ships the output to the retailers. The retailers then have to satisfy a stochastic demand which follows a general probability distribution. The objective is to view the system as an integrated whole and determine the production and shipment schedule which maximises the expected total profit in a selling period. The concavity of the expected total profit function is established, the global optimal solution is derived, and a simple but efficient algorithm is set out. Two special cases are considered, the first of which is for fast-moving items and the other for slow-moving items.

Suggested Citation

  • Majid M. Aldaihani & M.A. Darwish, 2013. "Optimal production and inventory decisions for supply chains with one producer and multiple newsvendors," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 15(4), pages 430-448.
    • Handle: RePEc:ids:ijsoma:v:15:y:2013:i:4:p:430-448
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