An Integrated Just-In-Time Inventory System with Stock-Dependent Demand

This paper considers a manufacturing system in which a single vendor procures raw materials from a single supplier in single/multiple instalments, processes them and ships the finished products to a single buyer in single/multiple shipments who stores them at a warehouse before presenting them to the end customers in a display area in single/multiple transfers. The demand is assumed to be deterministic and positively dependent on the level of items displayed. In a just-in-time (JIT) system, the manufacturer must deliver the products in small quantities to minimize the buyer's holding cost at the warehouse and accept the supply of small quantities of raw materials to minimize its own holding cost. Similarly, to minimize the display area holding cost, the buyer transfers the finished products in small lot sizes. We develop a mathematical model for this problem and illustrate the effectiveness of the model with numerical examples.