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fuzzy multi objective periodic review inventory problem in a dyadic supply chain system dicky fatrias and yoshiaki shimizu department of mechanical engineering toyohashi university of technology toyohashi 441 8580 japan ...

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                                 FUZZY MULTI-OBJECTIVE PERIODIC REVIEW 
                                          INVENTORY PROBLEM IN A DYADIC 
                                                      SUPPLY CHAIN SYSTEM 
                                                         Dicky Fatrias and Yoshiaki Shimizu 
                                        Department of Mechanical Engineering, Toyohashi University of Technology 
                                                                Toyohashi 441-8580, Japan 
                                                   Email: dicky@ise.me.tut.ac.jp, shimizu@me.tut.ac.jp 
                                                                       ABSTRACT 
                            This paper presents a fiizzy periodic review inventory model in a dyadic supply chain by 
                            incorporating some uncertain parameters. To cope with such uncertainty, a fuzzy multi-objective 
                            approach is introduced. A solution procedure is proposed such that several fuzzy goals are satisfied 
                            and, in the process, the optimal ordering policy and inventory level are determined.Through providmg 
                            hypothetically constructed case problem, the usefulness of our proposed model is demonstrated. 
                            KEY WORDS: fiizzy multi-objective problem, inventory, dyadic supply chain 
                            1. INTRODUCTION                                    satisfied and, in the process, the optimal 
                            The issue of considering uncertainty in  ordering policy and safety stock of manufacturer 
                            inventory problem has received a great deal of     and the optimal target stock level of retailer are 
                            attention in the field of production/inventory     determined. Through providing hypothetically 
                            management. In the context of periodic review      constructed case problem, we provide the 
                            system several researches have studies such        acceptable solutions. 
                            issue using stochastic approach under different 
                            concems.Recent researches carried out in this 
                            direction include Song & Lau (2004), Bijvank&      2. SYSTEM DESCRIPTION 
                            Johansen (2012), Prasertwattana & Shimizu.         In what follows, the proposed inventory model 
                            (2007) and Fatrias& Shimizu (2010).With the        will be described briefly. In all cases, we put the 
                            development of fiizzy set theory (FST), the        following assumptions. 
                            fiizzy approach is also employed for the            1. The manufacturer uses the periodic review 
                            modeling of uncertain parameters inventory             with lot sizing policy andsafety stock to 
                            problems. The FST copes with the uncertainty           control its inventory. 
                            related to unavailability and incompleteness of    2. The retailer uses the periodic review with 
                            data as well as and imprecise nature of goals of       target stock levelto control its inventory. 
                            which the use conventional probability  3. Only a single product is considered in the 
                            distribution impossible in this case.                  model. Without loss of the generality, the 
                            In this regard,this research proposes a fiizzy         manufacturer uses one unit of raw material 
                            multi-objective periodic review inventory model        to produce one unit of product. 
                            in a typical Supply chain (SC) system in           4. For both manufacturer and retailer, only one 
                            whichsingie-manufacturer, single-retailer is           order is allowed to place at any period. 
                            considered. Specifically, we attempt to develop    5. Production rate of the manufacturer is 
                            a fiizzy periodic review inventory model in a          assumed fixed and higher than the mean 
                            mixed imprecise and/or uncertain environment           demands. 
                            by incorporating the fiizziness of demand, lead    6. Unfulfilled demand at manufacturer is 
                            time and cost parameters.                              considered as backorder while unfulfilled 
                            To cope with such problem, solution procedure          demand atretailer is considered as shortages. 
                            is proposed such that several fiizzy goals are 
                            Managing Assets and Infrastructure in the Chaotic Global Economic Competitiveness             197 
                                  The system model is described based on the                                                                        manufacturer. 
                                  foUowingnotation listed for major parameters.                                                      p = Unit purchasing cost of retailer. 
                                                                                                                                     c = Unit holding cost of finished product of 
                                  Index                                                                                                             retailer. 
                                               Number of planning horizon. 
                                  T =                                                                                                J = Unit shortage cost of finished product 
                                  t             Period(/ = 1,2,...,7).                                                                              of retailer. 
                                               Number of days in each period.                                                       TCm = Total Cost of manufacturer. 
                                  h = 
                                  Parameters of Manufacturer                                                                        TCr = Total cost of retailer. 
                                   A           = Forecast demand of manufacturerat                                                  Decision Variabies 
                                                      period/.                                                                      LS = Lot sizing policy of manufacturer. 
                                  Q,           = Order quantity of manufacturer at                                                  ss = Safety stock level of manufacturer. 
                                                     period/.                                                                       S = Target stock level of retailer. 
                                  PR           = Production rate of Manufacturer. 
                                   Im,         = lead time of raw material delivery 
                                                      ffomsupplier at period /.                                                        Supplier j-j *• Manufacturer                      Retailer    —f-»-|^ustomers 
                                  Qpn  = Production quantity produced at 
                                                      period/. 
                                  Es,          = Ending stock of raw materials of                                                                  Figure 1. System Configuration 
                                                      at period /. 
                                  Ess,         = Ending safety stock of at period /.                                                The members in this chain consist of one 
                                  Qm,  = Ordering quantity at period /.                                                             supplier, one manufacturer, one retailer, and end 
                                  Qb,          = Backorder quantity at period /.                                                    customers as shown in Figure 1. However, this 
                                  Qsl,         = Sales volume at period /.                                                          study focuses on a dyadic relationship in the 
                                  EI,          = Ending inventory at period /.                                                      chain between the manufacturer and the 
                                  BR           = Backorder rate of manufacturer.                                                    retailer(the supplier and endcustomers are 
                                                                                                                                    considered as external members in the 
                                  Parameters of Retailer                                                                            chain).We assume that these two members are 
                                   d,        = End customer demand at period /.                                                     owned and controlled by a central company. 
                                   A  = Lead time of product delivery from                                                          Inventoryof each memberis controlled by a 
                                                                                                                                    periodic review in make-to-stock environment, 
                                                  manufacturerat period /.                                                          in whichdemand and leadtime, and cost 
                                  In         = Ending inventory of finished product                                                 parameters are considered as a fuzzy 
                                                  at period /.                                                                      number.The inventory level of manufacturer and 
                                  Qsr,  = Shortage quantity after receiving                                                         retailer are reviewed at every period time /, over 
                                                  replenishment at period /.                                                        totally T periods (plaiming horizon). Each 
                                  Qor,  = Order quantity at period /.                                                               period consists of interval of time tp days. 
                                  Qre,  = Replenishment quantity received at 
                                                  period/.                                                                          2.1 Manufacturer 
                                  LR         = Loss rate of retailer.                                                               Manufacturer receives raw materials from 
                                  Cost Parameters                                                                                   outside supplier which has unlimited capacity, 
                                                                                                                                    transforms it to finished product and then 
                                  0, = Order cost of manufacturer at period /.                                                      distributes the products to retailer. However, the 
                                   r = Unit purchasing cost of manufacturer.                                                        supplier may delay the supply of raw materials 
                                  m = Unit production cost of manufacturer.                                                         to the manufacmrer. Therefore, the manufacturer 
                                  h = Unit holding cost of raw material of                                                          has to select the appropriate material ordering 
                                                                                                                                   policy and hold safety stock of product to cope 
                                                  manufacturer.                                                                     with the uncertainty in demand and delivery 
                                  / = Unit holding cost of product of                                                               lead-time. 
                                                  manufacturer.                                                                    The ordering quantity of manufacturer is 
                                  b = Unit backorder cost ofmanufacturer.                                                          directly influenced by lot sizing policy {LS) 
                                  T = Unit transportation cost of                                                                  which is adopted for ordering raw material. 
                                  198                                                       Managing Assets and Infrastructure in the Chaotic Global Economic Competitiveness 
                       After the best pattern of LS is selected, the                         Qb, 
                       manufacturer will check the amount of                Min 5R, =E {Qorj)                          (3) 
                       inventory on hand at the beginning of the 
                       period. If the amount on hand is less than the 
                       sum of the demand and the amount to fill back        Min LRj='Z                                 (4) 
                       the safety stock, then the manufacturer will 
                       place the order to supplier. Otherwise no order 
                       will be issued. 
                       The manufacturer can start the production at the     3. SOLUTION METHODOLGY 
                       beginning of each period if raw material on hand     The proposed fuzzy periodic review inventory 
                       exists; otherwise the manufacturer has to wait       model is actually a multi-objective mfaced 
                       imtil arrival of raw material fi-om the supplier by  integer programming model (MOMIP). To solve 
                       timer+/ffj, • As a consequence, the production       the model, a solution procedure is proposed, 
                       quantity imder the combined order condition          First, the equivalent crisp MOMIP model is 
                       may become higher than "lot-for-lot" case and        converted into a single-objective MIP model. 
                       results in higher capability to supply retailer's    Then, one evolutionary optimization search 
                       demand (lower shortage cost) at the expense of       method named Differential Evolution (DE) is 
                       higlier holding cost.                                applied to find an optimal solution. 
                       2.2 Retailer                                         3.1 The Auxiliary Crisp MOMIP Model 
                       The retailer makes a regular order to the            Transforming a fuzzy MOMIP model into an 
                       manufacturer periodically to raise up the            auxiliary crisp MOMIP model require an 
                       inventory to the target stock level. The order       appropriate method. For this purpose, Jimenez 
                       quantity(gor,) is determined by comparing the        methodis applied because it is computationally 
                       ending stock level (/r,) at the review time t with   efficient to solve a fuzzy problem (See Jimenez 
                       the desired target stock level (5), which is equal   et al., 2007).According toJimenez method, the 
                       to (S-Ir,). This target stock level is not only to   auxiliary eq./ (l)-(4) can be formulated as 
                       cover the end customer's demand but also to          follows: 
                       cover the effect of its fluctuation as well as the    Min TCm = 
                       late delivery and unfulfilled quantity of products 
                       fi-om the manufacturer.                               t                     + Z                     Q, 
                       2.3 Objective Functions                                                             ( bi^' + 2b'"" +b'"''\ 
                       This study considers four objective functions to      i.                    Es.                        Qsl. 
                       evaluate the system performance. The first            (=1 
                       objective minimizes total cost of                        T                     {Ess. + EI,) 
                       manufacturer(rCm); the second objective 
                       minimizes total cost of retailer(TCr); the third 
                       objective function minimizesbackorder rate of             ^ti" +2t'"" +t°<"^ 
                       manufacturer (BR); and thefourth objective                                  Qsl, (5) 
                       function minimizesloss rate of retailer(I/?).         Min TCr = 
                       Min TCm= j;^d + f^SxQ,+f^hxEs,+                           pP"+2p""+p                  rc'*'-l-2c"'"-tc^'l 
                                                                                                    Qsl,+t                       Ir, 
                                    tcx{Ess,+EI,)+tb^Qb,+                             -^2s""+s*"''  Qsr,                  (6) 
                                    (=1 (=1 
                                    t^xQsl, (1) 
                                    (=1                                                      Qb, 
                                                                             Min BR,='Z                                   (7) 
                       Min TCr = tp>'Q^l,+idxIr,+ZsxQsr,                                     Qorj) 
                                     (=1 (=1 (=1 
                                                                   (2) 
                       Managing Assets and Infrastructure in the Chaotic Global Economic Competitiveness                199 
                                                                                                                                       4. COMPUTATINAL EXPERIMENT 
                                                                                Qsrj                                                   To illustrate the usefulness of the fuzzy MOMIP 
                                        in LRj=t                                                                                       model using the proposed solution procedure, a 
                                    Min                                                                                                numerical experiment is provided and the result 
                                                            (=1 
                                                                                                                                       is reported in this section utilizing input 
                                                                                                                                       parameters shown in Table I. 
                                                                                                                                           FomuUlc fuzzy MOMINLP 
                                   3.2 The Proposed Solution approach                                                                         pciiodic invelofy model 
                                    The steps of the proposed solution procedures                                                         Detennine membership functioir               GcDcrale initul population 
                                    are summarized as follows (Figure 2):                                                                    for fiizzy puumeters ind                    of Inrget vector. O - 0 
                                   Stepl: Formulate the fiizzy MOMIP                                                                            objeelive fiincriom 
                                                                                                                                                                                       Comptfte and evaluate the 
                                    (MOMINLP) periodic review inventory model                                                            I Convert the MOMINLP into in                 fitness of each target vector 
                                    as described in section 2.                                                                           1 equivnlent crisp model                                  i 
                                                                                                                                                                                       Apply muution, crossover 
                                                                                                                                         Find the range of each of objective            and selection operator to 
                                   Step 2: Determine the appropriate                                                                                                                   generate new target vector 
                                                                                                                                            function by cntcubling their 
                                   membership function for fuzzy parameters and                                                            minimum and maximum vahie                               \ 
                                    objective functions. In this formulated problem,                                                                                                          target vector 
                                    fiizzy parameters and objective functions are                                                           Cooveil Ac equivalent crup 
                                                                                                                                          MOMINLP model into a single-
                                    represented by linear membership fiinction.                                                         objective MINLP using Zimmerman                                               no 
                                                                                                                                                      method                                  Termination 
                                   Step 3: Convert the fiizzy MOMIP into an                                                                            I 
                                    auxiliary crisp MOMIP model. To this end, all                                                         DifTcrential Evolution Algoridun 
                                    the imprecise cost parameters in the objective                                                                      I 
                                    functions as well as the demand and lead time                                                           Gain tfie acceptable solution 
                                    parameters are converted into the crisp ones 
                                    using Jimenez method. 
                                   Step 4: Determine the rage of each objective                                                                       Figure 2. Solution methodology 
                                    function by calculating the minimum and 
                                    maximum value of each of them. To calculate                                                        4.1 Setting the Lower and Upper Bound 
                                    the minimum and maximum value of each                                                              For LS, the manufacturer has to decide whether 
                                    objective function, the auxiliary multi-objective                                                  to make the order at the beginning of every 
                                    crisp model should be solved each time only one                                                    period or combine the order in a big batch. 
                                    objective.                                                                                         Therefore, the binary coding is applied to 
                                   Step 5: Convert the auxiliary crisp MOMIP                                                           represent the value of LS. Thejjand .S are 
                                   model into a single-objective MlPbased on                                                           considered as the amount of products (units) at 
                                   Zimmermann'saggregation function 
                                   (Zimmermann, I993).The formulation of  the manufacturer and the retailer, respectively. 
                                   Zimmermann'saggregation function is as  So the integer coding is used to represent these 
                                   follows:                                                                                            values. 
                                                                                                                                       • Lower bound of LS is 0,which means"not 
                                                                                                                                               place the order" in current period but 
                                    Max 2 (9) 
                                                                                                                                                combine it to the previous period's order. 
                                    subject to:                                                                                                Upper bound of LS is 1 means "place the 
                                    2,
						
									
										
									
																
													
					
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...Fuzzy multi objective periodic review inventory problem in a dyadic supply chain system dicky fatrias and yoshiaki shimizu department of mechanical engineering toyohashi university technology japan email ise me tut ac jp abstract this paper presents fiizzy model by incorporating some uncertain parameters to cope with such uncertainty approach is introduced solution procedure proposed that several goals are satisfied the process optimal ordering policy level determined through providmg hypothetically constructed case usefulness our demonstrated key words introduction issue considering safety stock manufacturer has received great deal target retailer attention field production providing management context we provide researches have studies acceptable solutions using stochastic under different concems recent carried out direction include song lau bijvank description johansen prasertwattana what follows will be described briefly all cases put development set theory fst following assumption...

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