A Multiple-Buyer Single-Vendor in a Continuous Review Inventory Model with Ordering Cost Reduction Dependent on Lead Time

Abstract

In this competitive environment, integration between two or more business entities is an important way to gain competitive advantages as it lowers supply chain cost. This paper presents a multiple-buyer single-vendor integrated inventory system with ordering cost reduction on lead time. The options of ordering cost reduction included lead time of every buyer can be reduced at an added crash cost. Lead time plays a vital role in supply chain management and inventory management system. A lead time means that time gap between the placing of an order and its actual arrival in the inventory. In this paper, we study a continuous review model. The model is formulated to integrated total cost of the vendor-buyers system to determine the optimal solutions of order quantity, ordering cost, lead time and the number of deliveries between the vendor and buyers in a production cycle. Finally, a numerical example and effects of key parameter are included to illustrate the results of the proposed model.