Article ID: | iaor20134110 |
Volume: | 15 |
Issue: | 4 |
Start Page Number: | 430 |
End Page Number: | 448 |
Publication Date: | Jun 2013 |
Journal: | International Journal of Services and Operations Management |
Authors: | Darwish M A, Aldaihani Majid M |
Keywords: | production, inventory |
This paper considers a supply chain with a single manufacturer supplying a newsvendor‐type item to multiple retailers (newsvendors). The manufacturer produces the item in batches at a finite rate and ships the output to the retailers. The retailers then have to satisfy a stochastic demand which follows a general probability distribution. The objective is to view the system as an integrated whole and determine the production and shipment schedule which maximises the expected total profit in a selling period. The concavity of the expected total profit function is established, the global optimal solution is derived, and a simple but efficient algorithm is set out. Two special cases are considered, the first of which is for fast‐moving items and the other for slow‐moving items.