Master of Science in Industrial Engineering (MSIE)
In today’s competitive world, the unit cost of a high-tech product declines significantly over its life cycle. An integrated inventory model for products experiencing continuous decrease in unit cost is studied in this research. In this integrated model a manufacturing facility purchases raw material from outside supplier at a fixed size and supplies a fixed quantity of finished products to a buyer periodically after using its production processes. Moreover, buyers demand frequent deliveries of small lots of finished products since the price is continuously decreasing, and this emphasizes the significance of just-in-time (JIT) inventory management for successful companies in technology-related industries. The goal in this study is to minimize the total cost of the supply chain in JIT environment while the price of the high-tech product is linearly decreasing over its life cycle. A cost model composed of manufacturer’s raw materials and finished goods and buyer’s incoming goods inventory costs is developed here. An efficient algorithm is employed to determine the optimal or near-optimal lot sizes for raw material procurement, manufacturing batch and buyer’s ordering policies. It is also shown in the implemented model that the integrated total cost over the planning horizon considers the changing prices at each replenishment for both manufacturer’s and buyer’ s inventory costs. Consequently, in this article, the traditional integrated inventory model is relaxed by removing the restriction of constant unit cost. Finally, the solution technique for the developed model is illustrated with numerical examples, and compared with the previously developed integrated inventory models to test its accuracy. It is proven that the model is accurate and effective for the inventory systems with decreasing unit cost.
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Mungan, Deniz, "An optimal operational policy for an integrated production-delivery system under continuous price decrease" (2007). LSU Master's Theses. 3744.
Bhaba R. Sarker