Integrated inventory model for similar products under a two-echelon supply chain environment: an empirical study

In this paper we have considered a two echelon supply chain that handles multiple products under stochastic demand. Retailer sells products to customers and manufacturer produces them on a shared resource with limited capacity. Product changeovers incur significant setup cost and setup time. The objective is to find the production batch size, the stock to be held at the retailer, and the point at which the item should be taken up for production such that the total cost for the entire supply chain is minimized. We have come up with an analytical model for the case where all the products are similar. This model is tested on a wide range of problems and the comparison with simulation shows promising results. This would be useful in formulating simple rules of inventory management at retailer and manufacturer, whne the products under consideration are relatively similar.