Joint optimisation and timing synchronisation in a buyer supplier inventory system

This paper presents mathematical models of integrated inventory systems between buyer and supplier. We consider a situation where there are multiple deliveries for one order and the supplier produces in a multiple integer of delivery quantity and hence, an order can be split into a number of production runs. Furthermore, two policies are considered. First, delivery can only be made after the whole production batch is completed. Second, the first delivery could take place as soon as the supplier produced sufficient quantity for one delivery. The two policies may be used to compare different degree of information sharing and synchronisation between the buyer and the supplier and to provide an insight on the effect of faster inventory flow in a supply chain. In these two policies, adversarial relationships and joint decision are compared. We present numerical examples to illustrate the cost performances of different policies and different relationships between the buyer and the supplier. The models confirm the popular wisdom that better co-ordination between the buyer and the supplier could provide a better performance for the whole system. However, it is important to note that, the savings from better synchronisation or faster inventory flow (from policy one to policy two) have been shown to be much more substantial than those from merely applying joint lot sizing decisions.