A Joint Economic Lot Size Model for an Integrated Procurement/Production/Distribution Supply Network with Backlogged Shortage: A Heuristic Approach

One of the key elements to cost reduction is integration of inventory system. In this paper we consider an integrated four-echelon supply chain system. Then an integrated inventory model, making joint economic lot size of shortage, holding ordering and setup costs in all stages is developed. The aim of this model is to determine order quantity of each stage from its upstream stage and shortage level of each stage for its downstream stage such that minimize the total cost. Then a heuristic approach based on genetic algorithm for solving this problem and numerical examples presented.