Pollution-sensitive integrated production-inventory management for deteriorating items with quality loss and quantity loss with expiration date

This study presents an integrated single-vendor single-buyer production-inventory model for deteriorating items with the expiration date, which incorporates both quantity and quality losses to quantify their combined effects on the optimal response considering environmental pollution due to production. Consumer demand at the retail stage is a function of the selling price and the freshness condition of the finished inventory. The model is developed by defining the total profit of the supply chain members. A Stackelberg approach of game theory is utilised for determining the optimal equilibrium solution between the buyer and the vendor. The optimal equilibrium solutions that maximise the vendor’s and buyer’s total profits were determined through the method analysis. An algorithm complemented the model to determine the optimal equilibrium solutions, which were then treated with sensitivity analyses for the major parameters.