The consignment stock of inventories under buyer's warehouse space limitation

Abstract

In this paper, coordination between a single vendor (or manufacturer) and a buyer (or retailer) via the delivery schedule in a production and distribution system is presented. A continuous deterministic model with centralised decision process is developed. To satisfy the buyer's demands, the product is delivered in discrete batches from the vendor's stock to the buyer's stock subject to consignee's warehouse space capacity constraint. A more general type of consignment stock (CS) policies is analysed. The inventory patterns and the cost structure of production distribution cycles (PDC) are described under the constraint – when the ratio α of the sizes of delayed to just in time (JIT) for the vendor deliveries is given. Also, an analysis how an upper buyer's warehouse space limit can act as a key factor for implementing the generalised CS-policies successfully. Numerical examples are presented to illustrate the performance of model and the results. A comparative study of the results shows that the generalised CS-policies performs better.

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