Integrated Vendor-Buyer Lot-Sizing Model with Transportation and Quality Improvement Consideration under Just-in-Time Problem

This paper deals with the problem of transportation and quality within a Just-in-Time (JIT) inventory replenishment system. Formerly, transportation and quality problem are often modelled separately in most integrated inventory lot-sizing models. Hence, this paper develops an integrated vendor-buyer lot-sizing model by considering transportation and quality improvements into a JIT environment. The model is developed for minimising a total vendor-buyer system cost by optimising decisions such as delivery quantity, production batch, number of shipments, and process quality. Numerical examples and sensitivity analysis are provided to illustrate the proposed model. The developed model was also compared with an enumeration method to analyse the effectiveness of the proposed model to find the optimum solution. The results emphasise that the proposed model contributes to a new approach and obtains a near optimum solution for inventory replenishment decisions. The results are also beneficial to JIT practices as the model can improve the transport payload and reduce the chance of defective products and improving quality-related costs.