The impact of inventory information distortion due to customer order cancellations

The impact of inventory information distortion due to customer order cancellations

0.00 Avg rating0 Votes
Article ID: iaor19992795
Country: United States
Volume: 46
Issue: 2
Start Page Number: 213
End Page Number: 231
Publication Date: Mar 1999
Journal: Naval Research Logistics
Authors: ,
Abstract:

In this paper we study the impact of cancellations of customer orders on an inventory system. We develop a periodic review (s, S) inventory model with Poisson demands, deterministic demand leadtimes and supply leadtimes. When no set up cost is present for replenishment, the behavior of the system cost can be studied analytically. For the case with a fixed set up cost, we derive the operating characteristics of the model via an embedded Markov chain analysis. Based on this, we formulate the total cost function and suggest a two-phase approach to optimization. Our model can be used to compute cancellation fees and to evaluate the impacts of various conditions of cancellation. We find that cancellations, as major sources of inventory information distortion, increase total system costs, and the magnitude of the cost impact depends on the probability of cancellation and the expected cancellation time. Other relevant lessons and insights are also discussed.

Reviews

Required fields are marked *. Your email address will not be published.