Title: Optimal consignment stocking policy for a vendor-buyer supply chain system with periodic inventory audit and in-transit holding cost

Authors: Mohamed M. Ohaiba; Md. Shahriar J. Hossain; Bhaba R. Sarker

Addresses: Department of Mechanical and Industrial Engineering, Louisiana State University, Baton Rouge, 70803, LA, USA ' Department of Mechanical and Industrial Engineering, Louisiana State University, Baton Rouge, 70803, LA, USA ' Department of Mechanical and Industrial Engineering, Louisiana State University, Baton Rouge, 70803, LA, USA

Abstract: The research presents an integrated inventory model for a single-vendor-single-buyer consignment stock policy where demand rate and lead-time are constant. The vendor controls the buyer's warehouse, whereas the stock of all finished goods is owned by the vendor. The vendor delivers finished goods to the buyer at a fixed lot size. Shortage is not allowed by controlling the production rate greater than the demand rate. The problem is formulated as a nonlinear cost model which is minimised to arrive at an optimal policy to cooperatively operate the joint contract. An iterative search approach is followed to obtain an optimal value of order quantity and number of shipments. Computational results are presented for a practical example and some empirical studies. The model presented here are applicable in numerous supply chain systems including retail business, assembly and production houses, where two parties are tied together for achieving their common goal.

Keywords: consignment stock policy; two stage supply chain; single vendor-buyer cooperation; optimisation of consignment stock policy.

DOI: 10.1504/IJIR.2017.088757

International Journal of Inventory Research, 2017 Vol.4 No.2/3, pp.148 - 171

Received: 21 Mar 2017
Accepted: 06 Jun 2017
Published online: 17 Dec 2017 *

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