An Algebraic Decision Support Model for Inventory Coordination in the Generalized n-Stage Non-Serial Supply Chain with Fixed and Linear Backorders Costs

Abstract

This paper extends and generalizes former inventory models that apply algebraic methods to derive optimal supply chain inventory decisions. In particular this paper considers the problem of coordinating production-inventory decisions in an integrated n-stage supply chain system with linear and fixed backorder costs. This supply chain system assumes information symmetry which implies that all partners share their operational information. First, a mathematical model for the supply chain system total cost is formulated under the integer multipliers coordination mechanism. Then, a recursive algebraic algorithm to derive the optimal inventory replenishment decisions is developed. The applicability of the proposed algorithm is demonstrated using two different numerical examples. Results from the numerical examples indicate that adopting the integer multiplier mechanism will reduce the overall total system cost as compared to using the common cycle time mechanism.