Volume 2 Issue 1 pp. 123-140 Winter, 2011


Stochastic integrated vendor–buyer model with unstable lead time and setup cost


Chandra K. Jaggi and Neetu Arneja


This paper presents a new vendor-buyer system where there are different objectives for both sides. The proposed method of this paper is different from the other previously published works since it considers different objectives for both sides. In this paper, the vendor’s emphasis is on the crashing of the setup cost, which not only helps him compete in the market but also provides better services to his customers; and the buyer’s aim is to reduce the lead time, which not only facilitates the buyer to fulfill the customers’ demand on time but also enables him to earn a good reputation in the market or vice versa. In the light of the above stated facts, an integrated vendor-buyer stochastic inventory model is also developed. The propsed model considers two cases for demand during lead time: Case (i) Complete demand information, Case (ii) Partial demand information. The proposed model jointly optimizes the buyer’s ordered quantity and lead time along with vendor’s setup cost and the number of shipments. The results are demonstrated with the help of numerical examples.


DOI: 10.5267/j.ijiec.2010.06.001

Keywords: Inventory, Setup cost, Lead-time, Crashing cost, supply chain
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