Journal of Korean Institute of Industrial Engineers (대한산업공학회지)

Korean Institute of Industrial Engineers (대한산업공학회)
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A Long-term Replenishment Contract under (R, S) Policy

(R, S)정책하에서의 장기 보충계약

  • Kim, Yong Chan (Department of Industrial Engineering, Hanyang University) ;
  • Kim, Jong Soo (Department of Industrial Engineering, Hanyang University)
  • Published : 2004.09.30
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Abstract

By committing to a long-term replenishment contract, suppliers can mitigate the pressure to find new customers and afford to charge a discounted price to buyers seeking to lower their purchasing costs. In this paper, we develop an analytical model from buyer's perspective for the contracting process to investigate the buyer-supplier interactions. Based on the developed model, we propose an algorithm to derive optimal strategy for the contract. We consider a system with a single buyer and a supplier in a situation where the buyer's inventory is controlled by (R, S) policy under VMI setting. According to the contract, the supplier should replenish the buyer's inventory up to a fixed level every R times during a specified period. The buyer purchases any deficient amount from a spot market at a higher price. We show by computational experiment that our proposed algorithm finds the global optimum solution.

Keywords

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