Three-Echelon Inventory Model with Permissible Delay in Payments under Controllable Lead Time and Backorder Consideration

Abstract

This paper proposes a three-echelon inventory model with permissible delay in payments under controllable lead time and backorder consideration to find out the suitable inventory policy to enhance profit of the supply chain. In today’s highly competitive market, the supply chain management has become a critical issue in both practice and academic and supply chain members have to cooperate with each other to bring more benefits. In addition, the inventory policy is a key factor to influence the performance of the supply chain. Therefore, in this paper, we develop a three-echelon inventory model with permissible delay in payments under controllable lead time and backorder consideration. Furthermore, the purpose of this paper is to maximize the joint expect total profit on inventory model and attempt to discuss the inventory policy under different conditions. Finally, with a numerical example provided here to illustrate the solution procedure, we may discover that decision-makers can control lead time and payment time to enhance the performance of the supply chain.

Sustainable Inventory Management for Environmental Impact through Partial Backordering and Multi-Trade-Credit-Period

“…Sana et al [40] presented a three-level supply chain model for multi-products. Yang and Tseng [41] proposed a model of the multi-echelon supply chain with trade credit by considering the backorder and a controllable lead time. Jaggi et al [42] studied an inventory model with allowable shortages and trade credit for different circumstances.…”

Optimal Choices for the E-Tailer with Inventory Rationing, Hybrid Channel Strategies, and Service Level Constraint under Multiperiod Environments

“…Equation (11) shows the common demand satisfied by inhouse inventory. The computation of the priority demand fulfilled by in-house inventory and the lost sales of two classes of demand are the same as model II; then (9) can be extended to (12). The structure of the e-tailer's profit function is similar to (10), and then (13) is used to present the common profit function of the e-tailer in model II and model III:…”

“…(2) Through computer simulation, this paper examines the influences of channel differences variability on the optimal choices for the e-tailer under multiperiod environment with fuzzy demand and fuzzy lead time, which include margin difference of priority and margin difference of channel. (3) Though there is service level constraint in lots of inventory systems (e.g., Li et al [11]), the drop shipping ability of the supplier is limited, and the supplier provides different service levels for different demand types, unfulfilled demand in traditional inventory system seems as backorder [12][13][14] or lost sale [15][16][17], but in this study some of this demand will be fulfilled by drop shipping and the remaining seems to be lost sale which results in penalty cost for the e-tailer. These results have much useful information for the e-tailer to make the optimal choices under multiperiod environment with fuzzy demand and fuzzy lead time.…”

Integrated Supply Chain Cooperative Inventory Model with Payment Period Being Dependent on Purchasing Price under Defective Rate Condition

“…A new economic production quantity (EPQ) inventory is then proposed to minimize the total cost. Yang and Tseng [14] assumed that defective products occurred in the supplier and the manufacturer stage, and then backorder is allowed to develop a three-echelon inventory model. Permissible delay in payments and controllable lead time are also considered in the model.…”

“…The main purpose of this paper is to maximize the expected joint total profits. Based on Yang and Tseng's [14] model, we also considered the fact that some defective products can be repaired. Furthermore, we proposed functions between purchasing costs and permissible delayed payment period to balance the opportunity costs and interests income when we promote cooperation.…”