Lead-time Dependent Ordering Cost Reduction and Trade-credit: A Supply Chain Model with Stochastic Demand and Rework

Abstract

This study focuses on an integrated vendor-buyer supply chain model where the lead-time and ordering cost reduction act dependently. The lead time demand of a product follows a normal distribution. The manufacturing process is imperfect. During production run time, a certain percentage of defective products are produced, which are immediately reworked. Trade-credit financing has been taken into consideration. The goal of this study is to minimize the joint total expected cost by providing an inter-dependent reduction strategy of lead-time and ordering cost along with the determination of the optimal values of lead-time, number of deliveries, order lot size, ordering cost, lead-time crashing cost, and the joint total expected cost. A solution algorithm and a numerical example are presented to illustrate and establish the integrated model. This model can be used in textiles, automobiles and computers industries.