A Multi-Storehouse Supply Chain Considering Systems’ Reliability and Free Shipping

Abstract

This paper aims to frame a two-player supply chain model with a production system's reliability influenced products’ defection rate. Upon generating and inspecting the products, the producer reworks the defectives and sells the perfect and reworked items to a retailer providing him free products' delivery. The retailer stores both types of commodities in the respective showrooms of finite capacities and keeps the excess conforming products in a leased warehouse. Eventually, the formulation of these two partners' profit functions performed, and a numerical illustration demonstrates this model's applicability. Results shows, hiring a storehouse is profitable for the retailer and the deterioration of the production system’s reliability impacts adversely on the manufacturer's profit.