Title: Integrated inventory model for single vendor–single buyer with probabilistic demand

Authors: Wakhid Ahmad Jauhari, I. Nyoman Pujawan, Stefanus Eko Wiratno, Yusuf Priyandari

Addresses: Department of Industrial Engineering, Sebelas Maret University, Jl. Ir Sutami 36 A, Surakarta 57126, Indonesia. ' Department of Industrial Engineering, Sepuluh Nopember Institute of Technology, Kampus ITS Keputih Sukolilo, Surabaya 60111, Indonesia. ' Department of Industrial Engineering, Sepuluh Nopember Institute of Technology, Kampus ITS Keputih Sukolilo, Surabaya 60111, Indonesia. ' Department of Industrial Engineering, Sebelas Maret University, Jl. Ir Sutami 36 A, Surakarta 57126, Indonesia

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.

Keywords: inventory modelling; probabilistic demand; safety stock; supply chain management; SCM; delivery lot size; safety factor; production lot size; expected total cost.

DOI: 10.1504/IJOR.2011.040695

International Journal of Operational Research, 2011 Vol.11 No.2, pp.160 - 178

Published online: 16 Jun 2011 *

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