Article ID: | iaor2002233 |
Country: | Netherlands |
Volume: | 131 |
Issue: | 2 |
Start Page Number: | 309 |
End Page Number: | 323 |
Publication Date: | Jun 2001 |
Journal: | European Journal of Operational Research |
Authors: | Krass Dmitry, Chen Frank Y. |
Keywords: | inventory: order policies |
In this paper we address a buyer–supplier arrangement of particular importance: total order quantity commitment (TOQC). Under the TOQC contract that has been negotiated between the buyer and the supplier, the former agrees to an obligation to procure a certain quantity of an item from the latter over the predetermined period of time (additional quantity can be obtained maybe at a different price). The optimal inventory replenishment policy is shown to be dual order-up-to levels under a given TOQC, and the optimal TOQC is also demonstrated to be mathematically straightforward to obtain.