The effect of working environment aspects on a vendor-buyer inventory model

Working Environment (WE) refers to all working conditions that influence a workplace and related human health. Human beings are critical resources of competitive advantage that improve a company's performance. A detrimental "WE" causes occupational illnesses and fatigue that reduce work quality. Since humans are involved in all stages of operations in companies, this health-related performance loss can negatively impact the performance of inventory systems. Despite its importance, surprisingly WE-related performance losses have not been investigated in a supply chain context. This paper, therefore, integrates WE design into a two-level (vendor-buyer) supply chain and investigates its effect on production and inventory decisions. A poor WE design increases workers' errors that generate defective items, which subsequently deteriorates the performance (total cost) of an inventory system. Better WE conditions improve system performance as a result of more efficient production and inventory policy.