An integrated multi-stage supply chain inventory model with imperfect production process

Abstract

This paper deals with an integrated multi-stage supply chain inventory model with the objective of cost minimization by synchronizing the replenishment decisions for procurement, production and delivery activities. The supply chain structure examined here consists of a single manufacturer with multi-buyer where manufacturer orders a fixed quantity of raw material from outside suppliers, processes the materials and delivers the finished products in unequal shipments to each customer. In this paper, we consider an imperfect production system, which produces defective items randomly and assumes that all defective items could be reworked. A simple algorithm is developed to obtain an optimal production policy, which minimizes the expected average total cost of the integrated production-inventory system.