A Cooperative Replenishment Policy for a Supplier-retailer Supply Chain with a Batch Production Mode

Abstract

We consider a single-product supplier-retailer supply chain consisting of a supplier that produces a single product in a batch mode and delivers the product to a retailer who then sells the product to retail customers. In this system, the supplier and the retailer make a contract specifying that the supplier will deliver the product and replenish the retailer’s inventory up to a contracted level regularly. A mathematical model is developed to construct algorithms to determine the cost-minimizing replenishment intervals and the order-up-to level for the retailer as well as the batch size for the supplier. The proposed methods are tested for accuracy and efficiency in various experimental settings. Analysis of the results reveals that, using these methods, the cost-minimizing control parameters for each party as well as system-wide cost-minimization parameters can be found in a reasonable amount of computation time.