An optimal integrated inventory management for vendor-buyer with substitutable deteriorating product under joint replenishment and cost of substitution

Today's supply chain network needs a new paradigm shift in the way the buyer and the vendor collaborate. The present article develops an integrated approach for vendor-buyer considering substitutable deteriorating products under joint replenishment. In this study, we consider two mutually substitutable products, and substitution is only taken for the buyer end. In case of one product is out of inventory, the demand for that product can be partially met by the stock of the other product otherwise demand is lost. In the case of substitution, an extra cost of substitution gets involved. The demand, deterioration, and production rate are assumed to be deterministic and constant. The objective of this study is to find the optimal number of deliveries, lot size, production quantity, and stock levels to minimise the integrated entire cost incurred by vendor and buyer. The solution method is suggested to derive the optimal value. A numerical study is provided to show the applicability of the model. Sensitivity analysis and managerial implications are presented to illustrate the validity of the integrated model. The comparative analysis shows that in case of product substitution the effective integrated cost is considerably reduced.