Optimizing inventory decisions in a multi-stage multi-customer supply chain

Optimizing inventory decisions in a multi-stage multi-customer supply chain

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Article ID: iaor20041957
Country: United Kingdom
Volume: 39
Issue: 3
Start Page Number: 193
End Page Number: 208
Publication Date: May 2003
Journal: Transportation Research. Part E, Logistics and Transportation Review
Authors:
Keywords: distribution, optimization
Abstract:

Most supply chain models focus on two-stage chains in which vendors supply material to one customer. In this paper, we formulate a three-stage supply chain model where a firm can supply many customers. We deal with three inventory coordination mechanisms between chain members and solve a cost minimization model for each. We show that some of the coordination mechanisms can result in a significantly lower total cost than matching production and delivery along the chain. We provide some insights into when the added complexity of the second and third coordination mechanisms lead to significant cost reductions.

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