A Collaborative Deteriorating Inventory System with Imperfect Quality and Shortage Backordering

In this study, we develop a collaborative inventory system consisting of one supplier and one buyer. The objective is to maximize the total profit of the whole system when shortage caused by the imperfect quality can be completely backordered. To ensure mutual benefits to every player, a negotiation mechanism is incorporated to share the profit between both players according to their contribution. A deteriorating inventory system with finite replenishment rate and price sensitive demand is set to simulate a real situation of the high-tech, short life cycle and perishable fashion product. A numerical example and sensitivity analysis are carried out to illustrate the model.