The Effect of Unreliable Machine for Two Echelons Deteriorating Inventory Model

Many researchers have developed two echelons supply chain, however only few of them consider deteriorating items and unreliable machine in their models In this paper, we develop an inventory deteriorating model for two echelons supply chain with unreliable machine. The unreliable machine time is assumed uniformly distributed. The model is solved using simple heuristic since a closed form model can not be derived. A numerical example is used to show how the model works. A sensitivity analysis is conducted to show effect of different lost sales cost in the model. The result shows that increasing lost sales cost will increase both manufacture and buyer costs however buyer’s total cost increase higher than manufacture’s total cost as manufacture’s machine is more unreliable

Coordination of pricing, inventory, and production reliability decisions in deteriorating product supply chains

In this article, we study a two-level supply chain model for deteriorating items, in which the supplier’s production system is unreliable and the retailer’s demand is price-sensitive. The supplier’s production line may randomly shift from the in-control state to the out-of-control state. When the production line is in the out-of-control state, a proportion of the produced products will have bad quality. To mitigate the out-of-control risks, the supplier can improve the production line reliability by investing in high-quality machines, highly skilled workers, or advanced maintenance technologies. We start with the study of pricing and inventory problems concerning endogenous reliability in the integrated and decentralised scenario. To better illustrate the proposed models, two applicable algorithms are designed to determine the optimal production reliability, ordering quantity, and prices. Then, a cooperative reliability investment and revenue-sharing contract is proposed to coordinate the supply chain. Numerical examples and sensitivity analysis of the equilibrium strategies and coordinating results on key system parameters (e.g. deterioration rate, production rate, etc.) are given to verify the effectiveness of the contract, and meanwhile get some managerial insights