A novel approach to safety stock management in an integrated supply chain with controllable lead time and ordering cost reduction using present value

S. Tharani · Ramasamy Uthayakumar

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Supply Chain and Inventory Management Quality and Supply Management Sustainable Supply Chain Management

Abstract

This paper presents a novel approach to safety stock management and investigates the impact of lead time reduction within an integrated vendor–buyer supply chain framework using present value where lead time and ordering cost reductions act dependently. In particular, the cost of the safety stock is determined by adopting a logistic approximation to the standard normal cumulative distribution. The service level is formulated in relation to the dimension of the single shipment, to the average demand of the buyer and to the number of admissible stockouts. We first discuss the case where the lead time and ordering cost reductions with linear function, and then consider the logarithmic functional relationship. Numerical examples including the sensitivity analysis with some managerial insights of system parameters is provided to validate the results of the supply chain models. The main contribution of this paper is introducing various types of ordering cost reduction in Bragliaet al.(Appl. Stoc. Mod. Bus. Ind.32(2016) 99–112) by handling a new approach.

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References

1982Principles of inventory and materials management 1997The single-vendor single-buyer integrated production-inventory model with a generalised policy 1999The optimal production and shipment policy for the single-vendor singlebuyer integrated production-inventory problem 1991An Analytical Determination of Lead Time with Normal Demand 1994Inventory Models Involving Lead Time as a Decision Variable 1996Mixture Inventory Model with Backorders and Lost Sales for Variable Lead Time 2008A one-vendor multi-buyer integrated production-inventory model: The ‘Consignment Stock’ case 1999Some stochastic inventory models with deterministic variable lead time

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2020An optimal solution policy to an integrated manufacturer-retailers problem with normal distribution of lead times of delivering equal and unequal-sized batches

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