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Mathematical Problems in Engineering
Volume 2014, Article ID 809149, 16 pages
http://dx.doi.org/10.1155/2014/809149
Research Article

Three-Echelon Inventory Model with Permissible Delay in Payments under Controllable Lead Time and Backorder Consideration

Department of Transportation Science, National Taiwan Ocean University, Keelung City 202, Taiwan

Received 25 January 2014; Accepted 19 March 2014; Published 30 April 2014

Academic Editor: Sri Sridharan

Copyright © 2014 M. F. Yang and Wei-Chung Tseng. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper proposes a three-echelon inventory model with permissible delay in payments under controllable lead time and backorder consideration to find out the suitable inventory policy to enhance profit of the supply chain. In today’s highly competitive market, the supply chain management has become a critical issue in both practice and academic and supply chain members have to cooperate with each other to bring more benefits. In addition, the inventory policy is a key factor to influence the performance of the supply chain. Therefore, in this paper, we develop a three-echelon inventory model with permissible delay in payments under controllable lead time and backorder consideration. Furthermore, the purpose of this paper is to maximize the joint expect total profit on inventory model and attempt to discuss the inventory policy under different conditions. Finally, with a numerical example provided here to illustrate the solution procedure, we may discover that decision-makers can control lead time and payment time to enhance the performance of the supply chain.