Quadratic Approximation for an Inflationary Bi-objective Integrated Vendor-buyer Inventory Model with Imperfect Manufacturing Process and Fixed and Variable Lead Time Crash Costs

Abstract

In this paper, we develop an integrated bi-objective model of two-stage supply chain composed of a vendor and a buyer under an imperfect production process. The stochastic inflationary condition wherein the first objective is minimizing the expected costs of the proposed supply chain model and the second objective is minimizing buyer’s shortage variance. We assume lead time and ordering cost are controllable parameters and lead time crashing cost is considered as a function of both order quantity and reduced lead time. An effective solution procedure is developed to determine the optimal policy of the proposed model. Finally, a numerical example and sensitivity analysis are proposed to show the performance of the model.

Keywords

• supply chain
• integrated vendor-buyer inventory model
• lead time
• inflation
• stochastic
• multi-objective programming