The optimal production and shipment policy for the single-vendor single-buyer integrated production–inventory problem

The optimal production and shipment policy for the single-vendor single-buyer integrated production–inventory problem

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Article ID: iaor20002678
Country: United Kingdom
Volume: 37
Issue: 11
Start Page Number: 2463
End Page Number: 2475
Publication Date: Jan 1999
Journal: International Journal of Production Research
Authors:
Keywords: inventory
Abstract:

This paper considers the problem of a vendor (manufacturer) supplying a product to a buyer (customer). The vendor manufactures the product in batches at a finite rate and ships the output to the buyer. The buyer then consumes the product at a fixed rate. The objective is to minimize the mean total cost per unit time of manufacturing set-up, stock transfer and stock holding. Previously published work has concentrated on finding optimal solutions from within given classes of policy. We derive the structure of the globally-optimal solution, set out an algorithm for obtaining it and illustrate the process with two numerical examples.

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