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

Authors: Majid M. Aldaihani; M.A. Darwish

Addresses: Department of Industrial and Management Systems Engineering, College of Engineering and Petroleum, Kuwait University, P.O. Box 5969, 13060, Safat, Kuwait ' Department of Industrial and Management Systems Engineering, College of Engineering and Petroleum, Kuwait University, P.O. Box 5969, 13060, Safat, Kuwait

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.

Keywords: operations management; supply chain management; SCM; newsvendors; multiple retailers; production decisons; inventory decisions; optimisation; scheduling.

DOI: 10.1504/IJSOM.2013.054884

International Journal of Services and Operations Management, 2013 Vol.15 No.4, pp.430 - 448

Published online: 28 Apr 2014 *

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