Joint economic procurement-production-delivery policy for multiple items in a single-manufacturer, multiple-retailer system

This paper proposes an analytical model to effectively integrate and synchronize the procurement, production and delivery activities in a supply chain consisting of a single raw material supplier, a single manufacturer and multiple retailers. The manufacturer produces multiple items on a single facility utilizing common raw material under a common rotation cycle policy of not incurring shortages at any retailers. This problem is formulated as a variant of the classical economic lot scheduling problem. The objective is to find the production sequence of multiple items, the common production cycle length, and the delivery frequencies and quantities that minimize the average total cost. An efficient heuristic algorithm is presented to solve the proposed problem. Through numerical tests, we show that the proposed heuristic gives quite satisfactory solutions.