The replenishment policy of agri-products with stochastic demand in integrated agricultural supply chains

• We study EOQ/EPQ models considering stochastic demand of agri-products.
• We build system dynamic model for replenishment policies.
• We report the optimal replenishment policies of the supply chain.

Market demand of agri-products is influenced by uncertain factors, such as weather, temperature, and customer preferences. In integrated agricultural supply chains, traditional inventory models are useless because of the stochastic demand and deteriorative characteristic of agri-products. This paper provides a method to determine the optimal replenishment policy of integrated agricultural supply chains with stochastic demand. In these EOQ/EPQ models, shortages are allowed and are backlogged if market demand is stochastic. The objective function is to minimize the total cost of the supply chain in the planning horizon. The total cost includes the ordering cost, the holding cost, the shortage cost and the purchasing cost. Thinking of the nonlinear relationship and dynamic forces in models, a system dynamic (SD) simulation model is constructed to find the optimal lot size and replenishment interval. Finally, an example is given to make a sensitivity analysis of the simulation model. Compared to traditional methods (such as equalize stochastic demand), the total cost decreases by 16.27% if the supply chains adopt the new replenishment policy. The results illustrated that the new replenishment policy (with intelligent method) is beneficial to help supply chain make decision scientifically. Moreover, the intelligent method can simulate stochastic demand perfectly, and it is effectively for solving the complicated and mathematically intractable replenishment problem.