Effect of delayed differentiation on a multiproduct vendor-buyer integrated inventory system with rework

Abstract

This study explores the effect of delayed differentiation on a multiproduct vendor-buyer integrated inventory system with rework to identify its poten-tial benefits and provide managers with in-depth information for operational decision-making. The main considerations of the proposed study include a multiproduct fabrication plan to increase machine utilization, a rework pro-cess to ensure product quality, and a multi-shipment policy to distribute the end products. In addition, these products sharing an intermediate part for which a two-stage fabrication scheme is adopted, wherein the common parts are produced at the first stage and the end products are manufactured at the second stage. The aim is to reduce the overall system costs and shorten the replenishment cycle time. Mathematical modeling and optimization methods were employed to derive the closed-form optimal replenishment cycle time and delivery decisions. We demonstrated the applicability of our research results through numerical examples and revealed that for both linear and nonlinear relationships between the common intermediate part'fs completion rate '¿ and its practical value at '¿, our proposed two-stage production scheme with de-layed differentiation is considerably beneficial vis-a-vis single-stage schemes in saving overall system costs and reducing the replenishment cycle time.