Multi-level inventory management decisions with transportation cost consideration

In this article we address specific inventory management decisions with transportation cost consideration in a multi-level environment consisting of a supplier–warehouse–retailers. We develop two models – namely, decentralized ordering model and centralized ordering model to investigate the effect of collective ordering by retailers on the total inventory cost of the system. A numerical study shows that the proposed model is robust and generates reasonable cost savings. The models have potential in several multi-level applications such as fresh or frozen food delivery to stores of different supermarkets or the supply of medicine to a number of hospitals from a wholesaler.