An Integrated Inventory Model with Stock Dependent Demand under Inflation

Abstract

This study develops an integrated inventory model for a two-echelon supply chain, incorporating stock-dependent demand, inflation, partial backlogging, and product deterioration, with both forward and reverse manufacturing processes. The model simultaneously addresses retailer and supplier operations, including ordering, holding, deterioration, backordering, lost sales, and production costs, along with remanufacturing, recycling, and life-cycle design expenses. A numerical example demonstrates the application of the model using realistic cost and operational parameters, revealing optimal retailer cycle times, supplier production rates, remanufacturing rates, and total supply chain costs. Sensitivity analyses were conducted for key parameters, including retailer cost coefficients (c₁r, c₂r), demand intensity (b), and production cost (c), showing that increases in cost parameters and demand generally elevate total system cost, while cycle-time components respond moderately to these variations. The results provide actionable insights for optimizing inventory policies, shipment schedules, and remanufacturing strategies under economic and operational uncertainties. Overall, the proposed framework offers a practical, cost-efficient decision-making tool for managing inventory and enhancing sustainability in complex supply chains.