A VENDOR-BUYER OPTIMAL CONSIGNMENT POLICY FOR A SEASONAL PRODUCT WITH UNIFORM DISTRIBUTION OF DEMAND

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S. M. S. Islam
M. A. Hoque

Abstract

Use of seasonal products is common in our life. Control of management cost of these products
plays an important role in delivering them to customers with reasonable prices and profit. Some research has
been carried out with uniform distribution of demands to maximize profit independently for the vendor and the
buyer, and also for the integrated system by considering shortage cost and inventory cost of the unsold items. In
the latter system the vendor is liable for shipment, and bears financial holding cost by keeping items in the
buyer’s warehouse but retains the ownership, and the buyer bears only the operational holding cost. To make a
fruitful consignment agreement, the vendor guarantees the buyer to earn at least as much as in traditional policy
by offering the buyer an extra incentive along with the agreed commission. However, warehouse capacity,
transport cost and inventory cost during processing of a product and meeting demand are essential in this
system. To make the available models more realistic, this study extends them including these factors. New
solution techniques to the extended models are developed, and the effects of the included factors are highlighted
by comparative studies on the results of numerical problems.
Keywords: Consignment policy; Traditional policy; Newsboy problem; Inventory; Transport

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How to Cite
Islam, S. M. S., & Hoque, M. A. (2014). A VENDOR-BUYER OPTIMAL CONSIGNMENT POLICY FOR A SEASONAL PRODUCT WITH UNIFORM DISTRIBUTION OF DEMAND. Malaysian Journal of Science, 33(2), 219–227. https://doi.org/10.22452/mjs.vol33no2.7
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Original Articles