A supply chain model with service level constraints and strategies under uncertainty

Abstract

In the current socio-economic situation, the daily demand for essential goods in the business sector is always changing owing to various unavoidable reasons. As a result, choosing the right method for profitable business has become quite tricky. This study introduces different business strategies based on constant and fuzzy demands. There are two types of constraints considered in this model to avoid the backorder cost. However, combining the service-level constraints with the constant and fuzzy demand, this study compares the total costs, and finally, the best strategy is established. Moreover, investing a small amount, this model improves the quality of the products and reduces the vendor’s setup cost. Depending on the number of transported products, this model follows the transportation discount policy for hassle-free delivery of the products with a minimum delivery rate. The Kuhn-Tucker optimization technique is employed, and global optimality is verified numerically, analytically using the Hessian matrix. This model’s robustness is discussed through a comparative study, numerical examples, sensitivity analysis, graphical representation, and managerial insights. Finally, some concluding remarks along with future extensions are discussed.

Keywords

• Supply chain management (SCM)
• Controllable lead time
• Fuzzy demand
• Transportation discounts
• Distribution-free approach (DFA)
• Service level constraints (SLC)