In this paper, we investigate an inventory and production system in a three-layer supply chain system involving a single supplier, single manufacturer and multiple retailers. Earlier study in this type of supply chain only consider a single raw material in order to produce single item, but we consider raw materials in order to produce multiple items. It is assumed that the cycle time at each stage is an integer multiple of the adjacent downstream stage. We develop an iterative solution procedure to find the order quantity for the multiple items and raw materials that minimizes the supply chain-wide total cost per unit time of the supplier and manufacturer’s raw materials ordering and holding, setup and finished items holding, the retailer’s ordering and inventory holding. Numerical examples are presented to show that the proposed heuristic gives good performance.

In this paper, we consider a single-manufacturer single-buyer supply chain problem where a single manufacturer purchases and processes raw materials into a family of items in order to deliver a family of items to a single buyer at a fixed interval of time for effective implementation of Just-In-Time Purchasing. An integrated multi-item lot-splitting model of facilitating multiple shipments in small lots between buyer and manufacturer is developed in a JIT Purchasing environment. Previous research on the integrated model assumed that the manufacturer orders raw materials m (integer) times for every production run (lot multiplier policy for the raw material). In this paper, we consider a generalized policy in the replenishment of raw materials, allowing lot multiplier policy and lot splitting policy. An iterative solution procedure is developed to find the order interval for finished goods and raw materials, and number of shipments between buyer and manufacturer. We show by numerical example that when the integrated policy is adopted by both buyer and manufacturer in a cooperative manner, both parties can benefit.