Title: Cooperative inventory model for vendor-buyer system with quantity and freight discounts

Authors: Wakhid Ahmad Jauhari; Kartika Winingsih

Addresses: Department of Industrial Engineering, Sebelas Maret University, Jl. Ir Sutami 36 A, Surakarta 57126, Indonesia ' Department of Industrial Engineering, Production System Laboratory, Sebelas Maret University, Jl. Ir Sutami 36 A, Surakarta 57126, Indonesia

Abstract: In this paper, a single-vendor single-buyer integrated inventory model with stochastic demand and quantity and freight discounts is developed. Here, we consider a situation where vendor and shipper offer discounts to buyer. We propose four integrated inventory models by employing four discount schedules that is dual all-unit discount, dual incremental discount and two mixed discounts. An iterative procedure is proposed to find shipment size, safety factor, production batch and discount on proposed models. A numerical example is provided to show the benefit of using the models. The behaviour of the models affected by the changes of demand uncertainty, discounts and number of discount levels are also analysed.

Keywords: inventory management; quantity discounts; freight discounts; supply chain management; SCM; cooperative inventory modelling; vendor-buyer systems; stochastic demand; shipment size; safety factor; production batch; demand uncertainty; discount levels.

DOI: 10.1504/IJSOM.2016.080278

International Journal of Services and Operations Management, 2016 Vol.25 No.4, pp.508 - 530

Received: 03 Mar 2015
Accepted: 25 May 2015

Published online: 10 Nov 2016 *

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