A Production and Distribution Model for a Declining Inventory Item

Abstract: We create an integrated production-distribution model to address a failing two-tier supply chain. The supplier's production batch size is limited to an integer multiple of the discrete delivery lot amount for the buyer. Cost functions for suppliers, buyers, and the complete supply chain have been established. This leads to determining optimal policies for both individuals and the integrated supply chain. We provide a method for making optimum supply chain decisions while minimising overall system costs. Our technique is presented with a numerical example.