Integrated inventory models with fuzzy annual demand and fuzzy production rate in a supply chain

The successful implementation of Just-in-time (JIT) production in today's supply chain environment requires a new spirit of cooperation between the buyer and the vendor. An integrated inventory model with such a consideration is based on the total cost optimization under a common stock policy and business formula. However, the supposition of known annual demand in most related literature may not be realistic. This paper proposes the inclusion of fuzzy annual demand and/or the production rate, and then employs the signed distance, a ranking method for fuzzy numbers, to find the estimate of the common total cost in the fuzzy sense, and subsequently derives the corresponding optimal buyer's quantity and the integer number of lots in which the items are delivered from the vendor to the purchaser. Numerical examples are provided to illustrate the results of proposed models.     

A single-vendor single-buyer production-inventory model with controllable lead time and service level constraint for decaying items

This paper presents a production-inventory model in a single-vendor single-buyer system for decaying items which deplete with constant decay rate. It is assumed that the lead time demand follows a normal distribution and shortages are backordered. Also, buyer's lead time can be reduced at an added cost. A model has been formulated to find the optimal order quantity, lead time and the number of shipments from the vendor to the buyer during one production cycle while minimising the total expected cost per unit time of the vendor-buyer integrated system. It is often difficult to estimate the stock-out cost in inventory systems. Therefore, instead of having a stock-out term in the objective function, a service level constraint is included in the model. Due to mathematical complexities involved, it is difficult to establish the solutions analytically. An iterative procedure is developed to find the optimal solution using LINGO 10, and a numerical example is given to illustrate the results of the proposed model. Furthermore, the effects of key parameters are also studied to provide the insight into the structure of the solution. In addition, the savings of buyer and vendor are investigated from implementation of joint optimisation model over the model in which they minimise their own cost independently.     

A note on “Modelling an industrial strategy for inventory management in supply chains: the ‘Consignment Stock’ case”

Braglia and Zavanella [2003, Modeling an industrial strategy for inventory management in supply chains: the ‘consignment stock’ care, International Journal of Production Research, 41 (16), 3793–3808] proposed an analytic formulation of consignment stock (CS) policy and made a comparison with Hill [1999, The optimal production and shipment policy for a single-vendor, single-buyer integrated production-inventory problem. International Journal of Production Research, 37 (11), 2463–2473] model. Through dividing per unit holding cost into a financial and a storage one the present note extends their conclusion and shows whether the CS model offers lower costs depends on the comparative result of buyer's and vendor's storage costs.     

Vendor managed inventory with consignment stock for supply chain with stock- and price-dependent demand

This paper presents a single vendor–single buyer coordinated model. The vendor produces a single deteriorating item and transfers it to the buyer in equal shipments. The model is based on vendor managed inventory with consignment stock (VMI-CS) agreement in which the vendor uses the buyer’s warehouse. The buyer stocks items both on his shelf and in his warehouse. The demand is assumed to be linearly sensitive to inventory level and selling price. The objective is to determine variables that maximise the total profit. An exact solution procedure is proposed to find the optimal solution. Numerical results show that supply chain members will benefit from the advantages of economies of scale in coordinated model with VMI-CS policy.     

Optimising space utilisation in block stacking warehouses

Block stacking storage is an inexpensive storage system widely used in manufacturing systems where pallets of stock keeping units (SKUs) are stored in a warehouse at the finite production rates. However, determining the optimal lane depth that maximises space utilisation under a finite production rate constraint has not been adequately addressed in the literature and is an open problem. In this research, we propose mathematical models to obtain the optimal lane depth for single and multiple SKUs where the pallet production rates are finite. A simulation model is used to evaluate performance of the proposed models under stochastic uncertainty in the major production parameters and the demand.     

A systematic literature review of remanufacturing scheduling

This paper studies a vendor–buyer integrated inventory system with buyers’ variable demand and warehouse space limitation where the consignment stock (CS) replenishment operates under a controllable lead time. Within any cycle, the production rate, the number of shipments and the shipping size are all fixed. Based upon the CS policy, the vendor agrees to maintain the buyer’s inventory to be above a safety level and less than the buyer’s space limitation. Due to the uncertainty in the demand, shortages/over stocks are sometimes inevitable. In such cases, penalties are incurred to discourage such occurrence. The holding cost consists of a storage component and a financial component, and the lead time is controlled with an extra investment which is a function of both the shipment size and the reduced time. Two-constraint, five-variable mix-integer optimisation models are established to describe the CS system. Two doubly-hybrid meta-heuristic algorithms are employed to solve the models that are complex and difficult to solve with available techniques. Two numerical examples are used to illustrate the solution procedure and the analysis of the computational results reveals the effects of some important parameters used for the annual joint total expected cost of the integrated system. The computational efficiency and quality of the solutions are evaluated by comparing them with other existing and popular methods. The results founds in all comparative evaluation are very encouraging and competitive.     

An optimal consignment stock production and replenishment policy with controllable lead time

This paper considers a single-vendor and single-buyer production system in which the lead-time is controllable with an extra investment under a long-term agreement between the two trading partners. The vendor produces at a finite rate, ships the outputs in lots of equal size within a production cycle, and delays those shipments for a certain period when the buyer’s inventory approaches the capacity limits. Therefore, the arrival of these shipments does not lead to an increase in the buyer’s inventory. Meanwhile, the buyer holds the payment until the complete consumption of the products. The holding cost consists of a storage component and a financial component. A joint EOQ/EPQ model is then established under cases where the buyer’s unit storage holding cost might be greater or less than that of the vendor to jointly determine the number of shipments, the size of each shipment, the number of delayed shipments, and the lead time that minimise the yearly joint total expected cost (JTEC) of the system. An efficient solution procedure is provided to solve the non-linear integer optimisation model that defined the system under consideration. A method to determine the integer global optima from the real global optima is also presented. Two numerical experiments are conducted to illustrate the procedure and the results show that considering the combined effect of adopting a consignment stock policy and lead time crashing opportunities may lead to a better result than any of these two policies considered separately.     

The supplier–buyer integrated production-inventory model with random yield

This paper revisits the traditional supplier–buyer integrated production-inventory model which deals with the problem of a manufacturer (supplier) supplying a product to a retailer (buyer) serving the consumer market with constant stationary demand. The product is manufactured in batches at a finite rate. The supplier's production batch is depleted by the buyer's replenishment orders at periodic intervals. The buyer's inventory is then consumed by the market demand at a fixed rate. The problem is the simultaneous computation of the manufacturer's production lot-size and the buyer's replenishment order quantity, i.e. the integrated production-inventory policy parameters. The key characteristic considered in this paper is that the manufacturing process is imperfect, and, hence, there are defective items in each production lot. As a result, each replenishment order shipped to the buyer includes defective products and the non-defective percentage in each such shipment is random. Considering the case where the supplier replenishes the buyer via equal-sized shipments, we develop an analytical expression of the total expected cost for the supplier–buyer system under consideration, with and without a considerable inspection time. We first examine the case where the inspection time is negligible, and then we present a generalisation to consider the inspection time explicitly. Our goal is to model the impact of random yield on the system performance. Our findings are useful for computing the integrated production-inventory policy parameters while considering the supply uncertainty due to an imperfect manufacturing process. Through numerical examples, we quantify the impact of supply with random yield on the system performance and illustrate its relationship with the demand and production rate.     

Consignment stock theory with a fixed batch manufacturing process

This paper deals with stock control in a supply chain. The focus is on consignment stock (CS), an innovative collaborative relationship, which can create a win–win situation between the vendor and the buyer. Recently some analytical formulations have been proposed to optimise CS, and the present paper extends these models by considering a new critical factor: a fixed batch production process at the vendor's plant. This kind of production is typical if there are batch processing machines that can hold and simultaneously process a finite number of items, such as kilns for long heat treatment. Specifically, we consider a deterministic single-vendor single-buyer system. The buyer consumes a single product at a constant rate and is replenished by the vendor who produces in batches and incurs set-up costs. Each batch is dispatched to the buyer in a number of shipments, some of which may take place while production is still running. To minimise total operating costs (that is, manufacturing, replenishment and holding), two alternative production and shipment policies are proposed and analytically formulated as integer optimisation models. A step by step heuristic procedure to obtain the optimal solution is finally presented and demonstrated through numerical examples.     

Vendor-managed inventory with consignment stock agreement for single vendor–single buyer under the emission-trading scheme

This paper presents a joint economic lot size (JELS) model for coordinated inventory replenishment decisions under the vendor-managed inventory (VMI) with consignment stock (CS) agreement and an emission-trading scheme. The paper assumes a single product that flows along a two-level supply chain system, with a single vendor and a single buyer. The total cost of the system is the performance measure, which is the sum of the vendor’s and the buyer’s total costs. The total cost includes the set-up and order costs, inventory holding costs, greenhouse gases (GHG) emissions tax and penalty costs. A mathematical model is proposed to determine: (1) the vendor’s production lot size quantity; (2) the number of shipments sent by the vendor to the buyer in a cycle; and (3) the production rate that minimises the total cost of the supply chain. Some numerical examples are carried out, as well as comparisons with the traditional JELS model for a classic two-level supply chain. Results show that the performance of the system is better when it is operated under a VMI with CS agreement, which is capable of reducing the traditional inventory holding costs and, for some values of given parameters, the GHG emissions tax and penalty costs.     

A note on ‘A two-level supply chain with consignment stock agreement and stock-dependent demand’

This note points out that the cost functions within Zanoni and Jaber [Zanoni, S. and M. Y. Jaber. 2015. “A Two-level Supply Chain with Consignment Stock Agreement and Stock-dependent Demand.” International Journal of Production Research 53: 3561–3572] might be incorrect due to misuse of demand representation. By incorporating Braglia and Zavanella’s consignment stock model and relaxing the zero-inventory reordering constraint, Zanoni and Jaber made extensions of the integrated vendor–buyer supply chain with stock-dependent demand in Sajadieh, Thorstenson, and Akbari Jokar’s proposed model. However, Sajadieh, Thorstenson, and Akbari Jokar’s model has different scenarios than Braglia and Zavanella’s model, and these inconsistencies cause false formulation in Zanoni and Jaber’s paper. In this note, we first formulate the justified cost functions and then present characteristics of the corrected model.     

A note on the problem of scheduling a flexible manufacturing system for Just-in-time customers

In supplying just-in-time customers, one common industry practice is for the vendor to set up a warehouse near the point of demand. We assume that the plant is a flexible manufacturing system (FMS) where the changeover times between parts of the same family axe. negligible, but not between parts of different families. Thus the FMS must be configured to produce one family of parts at a time. For each part type, we assume that the vendor makes deliveries to the warehouse at fixed intervals. We examined two related issues: the run length for each part family and the number of deliveries to the warehouse in each cycle. We first showed that it is not necessary for the vendor to produce for each delivery, nor is it desirable to complete the entire production lot before delivery. We then investigated the FMS loading problem for two or more part-families. We developed the expressions for the optimal run length and delivery frequency, (1) when loading the part types sequentially and (2) when loading the part types simultaneously. The resulting models can be shown to be consistent with the classical EOQ model.     

Consignment stock policy with unequal shipments and process unreliability for a two-level supply chain

This paper considers a vendor managed inventory model with consignment stock policy in which a single vendor delivers a single product to a single buyer in unequal-sized shipments. The vendor’s production process may produce some defective items during a production run. The buyer performs a screening process immediately after receiving each delivery from the vendor and the vendor bears the warranty cost of defective item, if any. The buyer either scraps or repairs the defective items by sending them to a repair factory. The average expected profit of the integrated system is derived using renewal reward theorem and a solution procedure is suggested to determine the optimal shipment policy of the vendor. Numerical examples are taken to determine both the equal and unequal shipment policies and compare their relative performances.     

The trans-shipment problem in a two-echelon,multi-location inventory system with lost sales

In this paper, we address a two-echelon, multi-location pooling inventory system that consists of an outside supplier, a warehouse and two retailers. To control their inventories, both warehouse and retailers use (R,?s,?S) policy. The retailers face stochastic customer demands for a single product and the warehouse receives only the replenishment orders of retailers. In case of stock-out at retailers, emergency trans-shipments are used to satisfy the unmet demand at one retailer with the surplus from the other retailer. When the stock is insufficient at the warehouse, we propose two rationing policies to allocate on-hand stock between retailers. The demand that cannot be satisfied neither by stock on-hand nor by trans-shipment from retailers is considered lost. Our work has two objectives. First, we propose an inventory model based on three components: the optimisation inventory model, the trans-shipment policy and the rationing policies for determining the best values of (s,?S) at each location that minimise total system cost. Second, we validate this model via an empirical simulation study that allows us to identify the influential parameters on trans-shipment benefits.     

Learning and screening errors in an EPQ inventory model for supply chains with stochastic lead time demands

This paper investigates the role of variable lead time, learning in production and screening errors in a vendor–buyer supply chain with defective items. The vendor–buyer supply chain is modelled for supplying a single item considering that the lots from vendor may contain some defective items. It is assumed that demand during lead time follows a normal distribution. Moreover, the production time at vendor’s facility is assumed to follow learning whereas buyer’s screening for defective items is prone to errors as well. Numerical examples are presented to illustrate the impact of different variables in the model. The analysis shows that delay in transportation lead time forces the buyer to carry more inventories to avoid shortages. Further, Type I error has a major impact on this cost. It was found that learning in production keeps on reducing the total cost of the supply chain up to a threshold.     

A study of an integrated inventory with controllable lead time

The Japanese experience of Just-in-Time (JIT) production has shown that there are advantages and benefits associated with the efforts to reduce inventory lead time and the associated inventory cost. The length of lead time directly affects the customer service level, inventory investment in safety stock, and the competitive abilities of a business. In most of the literature dealing with inventory problems, either a deterministic model or probabilistic model, lead time is viewed as a prescribed constant or a stochastic variable, and is not subject to control. However, in many practical situations, lead time can be reduced by an additional cost. Moreover, the successful implementation of JIT production in today's supply chain enviromnent requires a new spirit of cooperation between the buyer and the vendor (Goyal and Srinivasan 1992). A desirable condition in long time purchase agreements in such a manufacturing environment is the frequent delivry of small quantities of items so as to minimize inventory holding cost for the buyer. The vendor also needs to minimize his or her total inventory costs. An integrated inventory model that allows the two trading parties to form a strategic alliance for profit sharing may prove helpful in breaking down the traditional barriers. This paper presents an integrated inventory model with controllable lead time. The model is shown to provide a lower total cost and shorter lead time compared with those of Banerjee (1986) and Goyal (1988), and is useful for practical inventory problems.     

Calculating the benefits of vendor managed inventory in a manufacturer-retailer system

Firms such as Wal-Mart and Campbell's Soup have successfully implemented vendor managed inventory (VMI). Articles in the trade press and academic literature often begin with the premise that VMI is ‘beneficial’; but beneficial to which party and under what conditions? We consider in this paper a vendor V that manufactures a particular product at a unique location. That item is sold to a single retailer, the customer C. Three cases are treated in detail: independent decision making (no agreement between the parties); VMI, whereby the supplier V initiates orders on behalf of C; and central decision making (both vendor and customer are controlled by the same corporate entity). Values of some cost parameters may vary between the three cases and each case may cause a different actor to be responsible for particular expenses. Under a constant demand rate, optimal solutions are obtained analytically for the customer's order quantity, the vendor's production quantity, hence the parties’ individual and total costs in the three cases. Inequalities are obtained to delineate those situations in which VMI is beneficial.     

Impact of required storage space on storage policy performance in a unit-load warehouse

The performance of a storage policy in a warehouse is usually evaluated on the basis of the average one-way travel distance/time needed to store/retrieve a load. Dividing the storage space into zones based on item turnover frequency can reduce the travel distance. However, for a given number of stored items, a larger number of storage zones also requires more storage space, because of reduced space sharing between the items, which increases travel time. This study considers the required space consumption by storage zoning in comparing the performance of random, full turnover-based and class-based storage policies for a unit-load warehouse operated by a forklift in single-command mode. A generalised travel distance model that considers the required space consumption is developed to compare the performance of these policies. Results show that the one-way travel distance of a random policy decreases with the increase in skewness of the demand curve. By considering the required space consumption, a class-based storage policy performs generally better than a full turnover-based policy. In addition, the optimal warehouse shape factor (ratio of warehouse width to depth) appears to decrease with the skewness of the demand curve. Warehouse managers are advised to adopt a wide-shallow warehouse layout when the item demands are approximately equal, whereas a narrow-deep layout is preferred when the demand curves are steep.     

A consignment stock coordination scheme for the production,remanufacturing and waste disposal problem

This paper extends the model of a production, remanufacturing and waste disposal system by adding a buyer (retailer) to the vendor’s system to form a two-level forward/reverse supply chain. The vendor and the buyer are assumed to operate according to a consignment stock policy. A mathematical model is developed for the cases when the production and remanufacturing batches are of different and equal sizes. The model also accounts for transportation, inspection and sorting costs. Numerical examples are provided and results are discussed. The results show that the collection rate of used items and the repairable rate have a significant impact on the total cost of the system and the batch sizes. It was suggested that it may not be possible to operate a system like the one described in the paper at its maximum environmental edge without receiving some incentives or tax brackets. Another possibility is for the system to undergo a continuous improvement process to reduce its operational costs, which may require additional investment.     

Two-echelon spare parts inventory system subject to a service constraint

In this paper, we consider a spare parts inventory problem faced by a manufacturer of electronic machines with expensive parts that are located at various customer locations. The parts fail infrequently according to a Poisson process. To serve customers when a failure occurs, the manufacturer operates a central warehouse and many field depots that stock spare parts. The central warehouse acts as a repair facility and replenishes stock at the field depots. There is a centralized decision-maker who manages the inventory in both the central warehouse and the field depots. We develop a continuous review, base stock policy for this two-echelon, multi-item spare parts inventory system. We formulate a model to minimize the system-wide inventory cost subject to a response time constraint at each field depot. We present an efficient heuristic algorithm and study its computational effectiveness.