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A Supply Chain Coordination Mechanism For Common Items Subject To Failure In The Electronics, Defense, And Medical Industries, Mikhail M. Sher, Seung-Lae Kim, Avijit Banerjee, Michael Paz

Michael Paz

Improved production processes, particularly miniaturization, have led to the development and use of non-reworkable items subject to failure in modern production environments. Coordinating supply chains for these items requires cooperation between suppliers and buyers in order to balance ordering/setup and holding costs among system partners. In this paper, we first determine optimal inventory policies for both the supplier and buyer. We then apply the bisection method to develop a mechanism which uses a common replenishment time to coordinate a supply chain consisting of a single supplier and n buyers. By utilizing this optimization framework, we minimize total system-wide costs and …