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Article history: Received October 2 2012 Received in revised format November 2 2012 Accepted November 2 2012 Available online 6 November 2012 This study develops an integrated production inventory model from the perspectives of vendor, supplier and buyer. The demand rate is time dependent for the vendor and supplier and buyer assumes the stock dependent demand rate. As per the demand, supplier uses two warehouses (rented and owned) for the storage of excess quantities. Shortages are allowed at the buyer’s part only and the unfulfilled demand is partially backlogged. The effect of imperfect production processes on lot sizing is also considered. This complete model is studied under the effect of inflation. The objective is to minimize the total cost for the system. A solution procedure is developed to find a near optimal solution for the model. A numerical example along with sensitivity analysis is given to illustrate the model. © 2013 Growing Science Ltd. All rights reserved

Three stage supply chain model with two warehouse, imperfect production, variable demand rate and inflation