Managing real-time demand fluctuation under a supplier–retailer coordinated system

We have considered a supplier–retailer system, that operates under an agreed coordinated policy, with an imperfect production process and a possibility of having demand fluctuation. In this paper, a dynamic planning process is proposed to deal with short-term demand fluctuations. To do this, a mathematical model was first developed for a single fluctuation, either for increasing or decreasing demand rate. The model generates a revised plan, after the occurrence of the fluctuation event. We also propose a new and efficient heuristic to solve the developed model. Secondly, multiple fluctuations have been considered, for which a new occurrence may or may not affect the revised plan of earlier occurrences and we extend the heuristic so that is capable of dealing with multiple demand fluctuations on a real time basis. We have generated a good number of random test problems and also solved the model using a genetic algorithm, in order to compare the solutions with our heuristic. The comparison confirmed the consistent performance of our developed heuristic, and also its lower computational time. Numerical examples and sensitivity analysis have been presented to explain the usefulness of the developed model.