Coordinated between single-vendor and single-buyer inventory model with lead time reduction and price discount

Abstract

This study is to construct an inventory system model in which a single vendor supplies a product to a single
buyer. The buyer uses the (R,Q) inventory policy. The inventory model analyzed the problem that the
ordering cost reductions depend on lead time in the continuous inspection inventory model with backorders
discount. The demand during lead time is distributed as normally distribution. Also, vendor manages the
complete items. Then, the minimization of the average total related cost by simultaneously optimizing the
order quantity, lead time and backorder price discount is considered. Moreover, a numerical example shows
that how the integrated inventory models can be applied to the system. The results indicate that the
percentage of average total cost savings depends on the shortened lead time.