An efficient replenishment model of deteriorating items for a supplier-buyer partnership in hi-tech industry

Due to rapid technological innovation and global competitiveness, the selling price of products in hi-tech industries usually declines significantly with time. This study develops a deteriorating inventory model for the product experiencing continuous decrease in unit price. This inventory model, from the perspective of supplier, proposes an efficient replenishment policy for a single-supplier-and-single-buyer supply chain in which the buyer conducts JIT through a realisation of multiple deliveries and the supplier performs one-time production. The objective of this model is, on the basis of the buyer's economic ordering decisions, to maximise the supplier's profit during a finite planning horizon and then to determine the optimal production cycle and product life cycle. A simple heuristic algorithm is developed to derive the optimal solution for the model. Numerical examples and sensitivity analyses confirm the performances of the proposed model and reveal some interesting managerial implications.