Consignment stock policy with controllable lead time for effective inventory management in supply chains

Abstract

In this paper, we develop an inventory model where the replenishment lead time is assumed to be dependent because at the time of contract with a manufacturer retailer may intend to reduce the lead time for which he pay an additional cost to accomplish the increased production rate. We provide a solution procedure to obtain the efficient ordering strategy in Hill’s inventory model in particularly Consignment Stock (CS) policy of Supply Chain Management (SCM) for a single vendor – single buyer under the stochastic nature. The lead time of CS strategy has been controlled to minimise Joint Total Expected Cost (JTEC) and simultaneously optimised other decision variables such as quantity transported, lead time, the number of transport operations and delay deliveries under stochastic environment so as to gain a competitive advantage in the business strategy. Numerical examples are presented to illustrate the solution procedure.