Single-vendor single-buyer optimal consignment policy with generic demand distribution by considering some realistic factors
by S.M. Shahidul Islam; Mohammad Abdul Hoque
International Journal of Operational Research (IJOR), Vol. 31, No. 2, 2018

Abstract: Consignment policy (CP) is a new fruitful technique to integrated inventory supply chain management. Success of the CP mostly depends upon the vendor's and the buyer's reliable collaboration. These strategic techniques were considered in the prior models but they were dealt without taking into account some realistic factors, such as work-in-process inventory, shipping time inventory, selling period inventory of sold products, transshipment cost, ordering cost, setup cost, and buyer's warehouse capacity constraint. This study presents a single-vendor single-buyer profit maximising consignment model with generalised demand distribution but considering these factors along with the ones considered previously. This model is compared with a traditional policy (TP) model developed in the similar fashion. Numerical examples with several patterns of demand distributions are set to illustrate the policies. Results show that both parties can earn more profit under CP than that of TP. Retail price markdown is analysed for the managerial implications.

Online publication date: Mon, 08-Jan-2018

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