Abstract
This paper presents an integrated production- inventory model that involves procurement, production, and delivery, in which product price is an unknown fluctuating pattern with time. A coordination policy is formulated to adapt the instantaneous production rate that reacts with continuous variation of product prices in such a way that the total cost is minimized. A solution procedure is coded to manage the optimal production rates, the economic raw material procurement quantity, the economic finished goods shipments to the customer, the number of shipments to the customer, and the number of raw material replenishment. The behaviour of the model is analysed in different numerical examples. The result of the model has been compared with a particular case of decreasing price over time in one of the previous studies. The results show that the proposed model supports and confirms to the success of reducing total cost in real time of the supply chain in such an environment.