Article ID: | iaor2006706 |
Country: | United Kingdom |
Volume: | 32 |
Issue: | 5 |
Start Page Number: | 1181 |
End Page Number: | 1196 |
Publication Date: | May 2005 |
Journal: | Computers and Operations Research |
Authors: | Lin Chinho, Lin Yihsu |
This paper proposes a two-echelon inventory model for a periodical commodity, in which the market and manufacturing channels are combined. This model can be used to solve the production policy, the order policies of the raw materials for the manufacturer, and order size for the retailer. By assuming that the retailers' demand obeys normal distribution and that the retailer makes orders according to the Newsboy Rule, we derive the necessary and sufficient conditions for the optimal solution of production size, wholesale price, and replenishment cycle of raw materials for the manufacturer. Also, the necessary condition is explored in order to gain managerial insights and economic implications based on numerical examples and sensitivity analysis.