The production size and inventory policy for a manufacturer in a two-echelon inventory model

Chinho Lin, Yihsu Lin

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)1181-1196
Number of pages16
JournalComputers and Operations Research
Volume32
Issue number5
DOIs
Publication statusPublished - 2005 May 1

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research

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