Integrated vendor-buyer cooperative models with Stochastic demand in controllable lead time

This article presents the single-vendor single-buyer integrated production inventory models. We relax the assumption that lead time demand, X, is deterministic and assume that it is stochastic. Also, we assume that shortage during the lead time is permitted, and lead time can be reduced at an added cost. Two models are considered here. In the first model, the demand of lead time follows a normal distribution, and in the second model, it is distribution-free. For both cases, we develop effective iterative procedures for finding the optiminal policy and numerical examples are used to illustrate the benefits of integration. (C) 2003 Elsevier B.V. All rights reserved.