An integrated excess stock return model with deteriorating items for vendor-buyer

Excess stock is a common phenomenon in a supply chain owing to over ordering and/or incorrect demand predictions. Excess stock is a valueless asset to an organization; it consumes working capital, uses valuable storage space, and decreases the return on investment. Therefore, excessive stock must be dealt with in order to derive an optimal inventory level for minimum total relevant costs. Previous researchers had considered the views of buyers to establish excess stock models to determine the inventory retention level, but the views of the vendors were not consulted. This results in local optimality only and unsatisfied vendors. This study to consider the views of the vendor-buyer and deteriorating items, and to develop an analytical model for the integrated inventory decisions in a supply chain. The results of the model can be a guide to decide the optimal quantity of return units to dispose of under various return purchase prices. A numerical example is provided to illustrate the theory.