Modeling the consignment inventory for a deteriorating item while the buyer has warehouse capacity constraint

In this article, we consider a single-manufacturer-single-buyer supply chain problem in which the manufacturer produces a single deteriorating product and delivers it to the buyer on the basis of a consignment policy. An integrated inventory control model, jointly determining the manufacturer's production batch and the replenishment lot sizes, is proposed to minimize the manufacturer's total cost per unit time. Both scenarios of the buyer with and without warehouse capacity constraint are presented. The characteristics of the model are discussed. In addition, the impacts of the buyer's warehouse capacity constraint on the manufacturer's total cost, production batch, and replenishment lot sizes are also presented through numerical illustrations. This model generalizes those published results and enables managers to move from a reactive mode to a proactive one by taking the supplier's perspective. (C) 2012 Elsevier B.V. All rights reserved.