Integrated vendor-buyer cooperative inventory models with variant permissible delay in payments

Abstract The integrated inventory models usually have the advantage of reducing total cost. However, the way to allocate the cost savings from the integration to the buyer and vendor is critical to the success of the joint relationship between both sides. To deal with this problem, this paper develops the integrated models with the permissible delay in payments for determining the optimal replenishment time interval and replenishment frequency. Applying the models and considering the coefficient of negotiation and the maximum delay payment period, a simple solution algorithm is presented to resolve the allocation of cost savings in the integration model. The coefficient of negotiation is adopted to determine the compromise between the buyer’s and vendor’s cost savings. A numerical example is used to demonstrate the feasibility of the proposed integration models. A sensitivity analysis is also conducted to demonstrate some properties. Using the information from the proposed models, the buyer and vendor can achieve an acceptable compromise solution for both sides in the supply chain management.