Optimal manufacturer-buyer cooperative inventory models under unequal shipment policy with emergency replacement of sub-standard items Online publication date: Thu, 09-Dec-2021
by Harun Öztürk
International Journal of Integrated Supply Management (IJISM), Vol. 15, No. 1, 2022
Abstract: This study considers replacement of sub-standard items with perfect ones from a local emergency manufacturer, since it would not be cost-effective to send these items back and would create an unequal shipment policy problem in the integrated inventory model of a single manufacturer and single buyer. This study presents two models. In the first model, it is assumed that the manufacturer supplies the quantity ordered by the buyer in geometric shipments. In the second model, the shipments of the quantity ordered by the buyer are assumed to be supplied in geometric-then-equal-sizes. The paper presents an iterative procedure to find the optimal solution, which is then tested through numerical examples which illustrate the results produced by the proposed models. Through this computational study, it was found that a 23% improvement can be achieved in the total supply chain cost by replacing sub-standard items in emergency, rather than repairing and salvaging them.
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