Title: Impact of lead time reduction and fuel consumption on a two-echelon supply chain inventory with a subsidised price and pick-up policy

Authors: Ivan Darma Wangsa; Hui Ming Wee

Addresses: Department of Industrial and Systems Engineering, Chung Yuan Christian University, Chungli, 32022, Taiwan ' Department of Industrial and Systems Engineering, Chung Yuan Christian University, Chungli, 32022, Taiwan

Abstract: In this paper, the issue of vendor-buyer coordination in a supply chain involving a logistics provider has been investigated. The purpose is to analyse the impact of lead time reduction, fuel prices and fuel consumption of the fleet on the total cost incurred by the single vendor-buyer supply chain. We consider stochastic demand and the fact that fuel prices are subsidised and regulated by the government. The objective is to minimise the total cost incurred by a single vendor-buyer supply chain. Logistics costs are a function of weight, distance, fuel price and consumption with two load conditions: truckload (TL) and less-than-truckload (LTL) shipments. This paper develops two models based on the prevailing operating conditions: in the first model, the vendor delivers their product to the logistics provider; and in the second model, the logistics provider offers a pick-up policy. Numerical examples and sensitivity analyses are given to illustrate the results.

Keywords: single vendor-buyer supply chain; stochastic demand; variable lead time; logistics costs; a subsidised fuel price and pick-up policy.

DOI: 10.1504/IJISM.2017.086215

International Journal of Integrated Supply Management, 2017 Vol.11 No.2/3, pp.264 - 289

Received: 07 Dec 2016
Accepted: 04 Mar 2017
Published online: 03 Sep 2017 *

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