Integrated vendor-buyer inventory models with inflation and time value of money in controllable lead time

• Main Authors: Prashant Jindal, Anjana Solanki
• Format: Article
• Language: English
• Published: Growing Science 2016-01-01
• Series: Decision Science Letters
• Subjects: Integrated; Inflation; Time value of money; Controllable lead time
• Online Access: http://www.growingscience.com/dsl/Vol5/dsl_2015_38.pdf

In the global critical economic scenario, inflation plays a vital role in deciding optimal pricing of goods in any business entity. This article presents two single-vendor single-buyer integrated supply chain inventory models with inflation and time value of money. Shortage is allowed during the lead-time and it is partially backlogged. Lead time is controllable and can be reduced using crashing cost. In the first model, we consider the demand of lead time follows a normal distribution, and in the second model, it is considered distribution-free. For both cases, our objective is to minimize the integrated system cost by simultaneously optimizing the order quantity, safety factor, lead time and number of lots. The discounted cash flow and classical optimization technique are used to derive the optimal solution for both cases. Numerical examples including the sensitivity analysis of system parameters is provided to validate the results of the supply chain models.