Incorporating Transportation Cost into Joint Economic Lot Size For Single Vendor-Buyer

Considerable attention to coordinate the system between buyer and vendor has become an interesting issue to efficiently increase the performance of supply chain activities. Joint economic lot size model (JELS) has been introduced by many researchers as the spirit of coordinating the flow of material from the vendor to its downstream. As an inventory replenishment technique, JELS model is centered on reducing joint total cost of vendor and buyer by simultaneously deciding optimal delivery lot size, number of deliveries, and batch production lot. It is appropriate to take into account transportation costs as the function shipping weight and distance since delivery lot size has interrelated with shipping weight. Hence, this study constitutes an effort to develop the model of JELS by incorporating transportation cost. The solution procedure of the model is developed for solving two problems which are incapacitated and capacitated model. In addition, numerical examples were provided to illustrate the feasibility of the solution procedure in deriving optimal solution. The result presents central decision making which is useful for coordination and collaboration between vendor and buyer. Index Terms—Supply chain, Joint economic lot size, Transportation.

[1]  Daesung Ha,et al.  A JIT lot-splitting model for supply chain management: Enhancing buyer–supplier linkage , 2003 .

[2]  William J. Baumol,et al.  An Inventory Theoretic Model of Freight Transport Demand , 1970 .

[3]  C. Glock.  The joint economic lot size problem: A review , 2012 .

[4]  Scott R. Swenseth,et al.  Just‐ In‐ Time : Some Effects on the Logistics Function , 1990 .

[5]  Michael Godfrey,et al.  ESTIMATING FREIGHT RATES FOR LOGISTICS DECISIONS. , 1996 .

[6]  Abraham Mendoza,et al.  Incorporating quantity discounts to the EOQ model with transportation costs , 2008 .

[7]  Chia-Hsien Su.  Optimal replenishment policy for an integrated inventory system with defective items and allowable shortage under trade credit , 2012 .

[8]  Abraham Mendoza,et al.  Estimating freight rates in inventory replenishment and supplier selection decisions , 2009, Logist. Res..

[9]  Prafulla Joglekar.  Note-Comments on A Quantity Discount Pricing Model to Increase Vendor Profits , 1988 .

[10]  Xiaofei Xu,et al.  INCORPORATING TRANSPORTATION COSTS INTO JIT LOT SPLITTING DECISIONS FOR COORDINATED SUPPLY CHAINS , 2006 .

[11]  Douglas J. Thomas,et al.  Coordinated supply chain management , 1996 .

[12]  A. Banerjee,et al.  An integrated JIT inventory model , 1995 .

[13]  B. R. Sarker,et al.  Multi-vendor integrated procurement-production system under shared transportation and just-in-time delivery system , 2010, J. Oper. Res. Soc..

[14]  Hartmut Stadtler,et al.  Supply chain management and advanced planning--basics, overview and challenges , 2005, Eur. J. Oper. Res..

[15]  A. Banerjee.  A JOINT ECONOMIC-LOT-SIZE MODEL FOR PURCHASER AND VENDOR , 1986 .

[16]  Suresh Kumar Goyal,et al.  An integrated inventory model for a single supplier-single customer problem , 1977 .

[17]  Eric Sucky,et al.  Inventory management in supply chains: A bargaining problem , 2005 .

[18]  P. C. Yang,et al.  Global optimal policy for vendor–buyer integrated inventory system within just in time environment , 2007, J. Glob. Optim..

[19]  Michael Godfrey,et al.  Incorporating transportation costs into inventory replenishment decisions , 2002 .