Bi-product inventory planning in a three-echelon supply chain with backordering, Poisson demand, and limited warehouse space


School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran, P.O. Box: 11555-4563, Iran


In this paper, we apply continuous review (S-1, S) policy for inventory control in a three-echelon supply chain (SC)
including r identical retailers, a central warehouse with limited storage space, and two independent manufacturing
plants which offer two kinds of product to the customer. The warehouse of the model follows (M/M/1) queue
model where customer demands follow a Poisson probability distribution function, and customer serving time is
exponential random variable. To evaluate the effect of considering bi-product developed model, solution of the
developed model is compared with that of the two (M/M/1) queue models which are separately developed for
each product. Moreover, and in order to cope with the computational complexity of the developed model, a
particle swarm optimization algorithm is adopted. Through the conducted numerical experiments, it is shown that
total profit of the SC is significantly enhanced using the developed model.