IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v315y2022i2d10.1007_s10479-021-04105-0.html
   My bibliography  Save this article

Impact of uncertain demand and lead-time reduction on two-echelon supply chain

Author

Listed:
  • Sumon Sarkar

    (Jadavpur University)

  • Sunil Tiwari

    (National University of Singapore)

  • B. C. Giri

    (Jadavpur University)

Abstract

This paper develops a continuous-review vendor-buyer supply chain (SC) model wherein the lead-time (taken as replenished) is considered as a factor affected upon by the time stamp required for setup and production followed by transportation. Here, the production time indicates the interaction between the lot-size and lead-time. Assuming the existence of an opportunity with the buyer of reducing the replenishment lead-time. The buyer receives normally distributed stochastic lead-time demands from its customers. Due to the stochastic nature of lead-time demand, shortages may arise at the buyer’s side which is fully backlogged. We presume imperfection production at the vendor’s end, which leads to the generation of a certain ratio/percentage of defective products, which results in additional warranty costs for the vendor. This study intends to uncover the best policy that minimizes the system’s total expected cost. A solution algorithm with some lemmas is provided which helped in finding the optimal solution and to prove the uniqueness of the solutions. Findings demonstrate that a reduction in lead-time can effectively lower safety stock as well as the total cost.

Suggested Citation

  • Sumon Sarkar & Sunil Tiwari & B. C. Giri, 2022. "Impact of uncertain demand and lead-time reduction on two-echelon supply chain," Annals of Operations Research, Springer, vol. 315(2), pages 2027-2055, August.
    • Handle: RePEc:spr:annopr:v:315:y:2022:i:2:d:10.1007_s10479-021-04105-0
    DOI: 10.1007/s10479-021-04105-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10479-021-04105-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10479-021-04105-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Huang, Chao-Kuei, 2004. "An optimal policy for a single-vendor single-buyer integrated production-inventory problem with process unreliability consideration," International Journal of Production Economics, Elsevier, vol. 91(1), pages 91-98, September.
    2. Glock, C. H. & Ries, J. M., 2013. "Reducing lead-time risk through multiple sourcing: the case of stochastic demand and variable lead-time (angenommen)," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 57810, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Ertogral, K. & Darwish, M. & Ben-Daya, M., 2007. "Production and shipment lot sizing in a vendor-buyer supply chain with transportation cost," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1592-1606, February.
    4. Glock, C. H., 2012. "Lead time reduction strategies in a single-vendor-single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 57816, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    5. Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2004. "Integrated vendor-buyer cooperative models with stochastic demand in controllable lead time," International Journal of Production Economics, Elsevier, vol. 92(3), pages 255-266, December.
    6. David, Israel & Eben-Chaime, Moshe, 2008. "How accurate is the integrated vendor-buyer continuous model?," International Journal of Production Economics, Elsevier, vol. 114(2), pages 805-810, August.
    7. Buratto, Alessandra & Cesaretto, Rudy & De Giovanni, Pietro, 2019. "Consignment contracts with cooperative programs and price discount mechanisms in a dynamic supply chain," International Journal of Production Economics, Elsevier, vol. 218(C), pages 72-82.
    8. Rad, Reza Hosseini & Razmi, Jafar & Sangari, Mohamad Sadegh & Ebrahimi, Zahra Fallah, 2014. "Optimizing an integrated vendor-managed inventory system for a single-vendor two-buyer supply chain with determining weighting factor for vendor׳s ordering cost," International Journal of Production Economics, Elsevier, vol. 153(C), pages 295-308.
    9. Ben-Daya, M. & Hariga, M., 2004. "Integrated single vendor single buyer model with stochastic demand and variable lead time," International Journal of Production Economics, Elsevier, vol. 92(1), pages 75-80, November.
    10. Glock, Christoph H., 2012. "Lead time reduction strategies in a single-vendor–single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand," International Journal of Production Economics, Elsevier, vol. 136(1), pages 37-44.
    11. Tiwari, Sunil & Kazemi, Nima & Modak, Nikunja Mohan & Cárdenas-Barrón, Leopoldo Eduardo & Sarkar, Sumon, 2020. "The effect of human errors on an integrated stochastic supply chain model with setup cost reduction and backorder price discount," International Journal of Production Economics, Elsevier, vol. 226(C).
    12. Ryu, Si Wook & Lee, Kyung Keun, 2003. "A stochastic inventory model of dual sourced supply chain with lead-time reduction," International Journal of Production Economics, Elsevier, vol. 81(1), pages 513-524, January.
    13. Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2007. "An integrated vendor-buyer inventory model with quality improvement and lead time reduction," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 349-358, July.
    14. Mou, Qiong & Cheng, Yunlong & Liao, Huchang, 2017. "A note on “lead time reduction strategies in a single-vendor-single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand”," International Journal of Production Economics, Elsevier, vol. 193(C), pages 827-831.
    15. Hossain, Md Shahriar J. & Ohaiba, Mohamed M. & Sarker, Bhaba R., 2017. "An optimal vendor-buyer cooperative policy under generalized lead-time distribution with penalty cost for delivery lateness," International Journal of Production Economics, Elsevier, vol. 188(C), pages 50-62.
    16. Hsiao, Yu-Cheng, 2008. "Integrated logistic and inventory model for a two-stage supply chain controlled by the reorder and shipping points with sharing information," International Journal of Production Economics, Elsevier, vol. 115(1), pages 229-235, September.
    17. Govindan, Kannan, 2015. "The optimal replenishment policy for time-varying stochastic demand under vendor managed inventory," European Journal of Operational Research, Elsevier, vol. 242(2), pages 402-423.
    18. Hsiao, Yu-Cheng, 2008. "A note on integrated single vendor single buyer model with stochastic demand and variable lead time," International Journal of Production Economics, Elsevier, vol. 114(1), pages 294-297, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sumon Sarkar & Bibhas C. Giri, 2022. "Safety stock management in a supply chain model with waiting time and price discount dependent backlogging rate in stochastic environment," Operational Research, Springer, vol. 22(2), pages 917-946, April.
    2. Glock, Christoph H., 2012. "The joint economic lot size problem: A review," International Journal of Production Economics, Elsevier, vol. 135(2), pages 671-686.
    3. S. Sarkar & B. C. Giri, 2020. "A vendor–buyer integrated inventory system with variable lead time and uncertain market demand," Operational Research, Springer, vol. 20(1), pages 491-515, March.
    4. Oshmita Dey, 2019. "A fuzzy random integrated inventory model with imperfect production under optimal vendor investment," Operational Research, Springer, vol. 19(1), pages 101-115, March.
    5. Dey, O. & Giri, B.C., 2014. "Optimal vendor investment for reducing defect rate in a vendor–buyer integrated system with imperfect production process," International Journal of Production Economics, Elsevier, vol. 155(C), pages 222-228.
    6. AlDurgam, Mohammad & Adegbola, Kehinde & Glock, Christoph H., 2017. "A single-vendor single-manufacturer integrated inventory model with stochastic demand and variable production rate," International Journal of Production Economics, Elsevier, vol. 191(C), pages 335-350.
    7. Mosca, Alyssa & Vidyarthi, Navneet & Satir, Ahmet, 2019. "Integrated transportation – inventory models: A review," Operations Research Perspectives, Elsevier, vol. 6(C).
    8. Tiwari, Sunil & Kazemi, Nima & Modak, Nikunja Mohan & Cárdenas-Barrón, Leopoldo Eduardo & Sarkar, Sumon, 2020. "The effect of human errors on an integrated stochastic supply chain model with setup cost reduction and backorder price discount," International Journal of Production Economics, Elsevier, vol. 226(C).
    9. K. F. Mary Latha & M. Ganesh Kumar & R. Uthayakumar, 2021. "Two echelon economic lot sizing problems with geometric shipment policy backorder price discount and optimal investment to reduce ordering cost," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 1133-1163, December.
    10. Bendre, Abhijit Bhagwan & Nielsen, Lars Relund, 2013. "Inventory control in a lost-sales setting with information about supply lead times," International Journal of Production Economics, Elsevier, vol. 142(2), pages 324-331.
    11. Mou, Qiong & Cheng, Yunlong & Liao, Huchang, 2017. "A note on “lead time reduction strategies in a single-vendor-single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand”," International Journal of Production Economics, Elsevier, vol. 193(C), pages 827-831.
    12. Asif Iqbal Malik & Biswajit Sarkar, 2020. "Coordination Supply Chain Management Under Flexible Manufacturing, Stochastic Leadtime Demand, and Mixture of Inventory," Mathematics, MDPI, vol. 8(6), pages 1-32, June.
    13. Mehmood Khan & Matloub Hussain & Leopoldo Eduardo Cárdenas-Barrón, 2017. "Learning and screening errors in an EPQ inventory model for supply chains with stochastic lead time demands," International Journal of Production Research, Taylor & Francis Journals, vol. 55(16), pages 4816-4832, August.
    14. M. Ganesh Kumar & R. Uthayakumar, 2017. "An integrated single vendor–buyer inventory model for imperfect production process with stochastic demand in controllable lead time," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(2), pages 1041-1054, November.
    15. M. A. Hoque, 2021. "An optimal solution policy to an integrated manufacturer-retailers problem with normal distribution of lead times of delivering equal and unequal-sized batches," OPSEARCH, Springer;Operational Research Society of India, vol. 58(2), pages 483-512, June.
    16. Glock, Christoph H. & Rekik, Yacine & Ries, Jörg M., 2020. "A coordination mechanism for supply chains with capacity expansions and order-dependent lead times," European Journal of Operational Research, Elsevier, vol. 285(1), pages 247-262.
    17. Castellano, Davide & Gallo, Mosè & Grassi, Andrea & Santillo, Liberatina C., 2019. "The effect of GHG emissions on production, inventory replenishment and routing decisions in a single vendor-multiple buyers supply chain," International Journal of Production Economics, Elsevier, vol. 218(C), pages 30-42.
    18. Xianpei Hong & Wang Chunyuan & Lei Xu & Ali Diabat, 2016. "Multiple-vendor, multiple-retailer based vendor-managed inventory," Annals of Operations Research, Springer, vol. 238(1), pages 277-297, March.
    19. Huang, Shupeng & Potter, Andrew & Eyers, Daniel & Li, Qinyun, 2021. "The influence of online review adoption on the profitability of capacitated supply chains," Omega, Elsevier, vol. 105(C).
    20. Chen, Liang-Hsuan & Kang, Fu-Sen, 2010. "Coordination between vendor and buyer considering trade credit and items of imperfect quality," International Journal of Production Economics, Elsevier, vol. 123(1), pages 52-61, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:315:y:2022:i:2:d:10.1007_s10479-021-04105-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.