Integrated inventory model for single vendor–single buyer with probabilistic demand
by Wakhid Ahmad Jauhari, I. Nyoman Pujawan, Stefanus Eko Wiratno, Yusuf Priyandari
International Journal of Operational Research (IJOR), Vol. 11, No. 2, 2011

Abstract: In this paper, we consider single vendor–single buyer integrated inventory model with probabilistic demand and equal delivery lot size. The model contributes to the current literature by relaxing the deterministic demand assumption which has been used for almost all integrated inventory models. The objective is to minimise expected total costs incurred by the vendor and the buyer. We develop effective iterative procedures for finding the optimal solution. Numerical examples are used to illustrate the benefit of integration. A sensitivity analysis is performed to explore the effect of key parameters on delivery lot size, safety factor, production lot size factor and the expected total cost. The results of the numerical examples indicate our integrated model gives a significant cost savings over independent model.

Online publication date: Sat, 14-Feb-2015

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