3-Echelon distribution policy with order flexibility and direct ordering system

This paper considers a three-echelon supply chain inventory problem consisting of single manufacturer, distributor and retailer. In the system under discussion, the manufacturer produces a product and supplies it to the distributor and it is also allowed to direct shipping to supplier facing a deterministic demand but the time span of delivery is relatively short. We develop some scenario to accommodate special policies that minimizes the total cost and subsequently taking into account the loss of flexibility in the condition when the size of order quantity is too big. Model development discussed in this paper is to enable the model to choose not only the distributor but also the manufacturer as a candidate of supplier. The objective function is to minimize the total expected cost of the system. An algorithm is developed to obtain the optimal solution and a numerical example is also included to show the results of the proposed model.