Inventory positioning in multiple product supply chains

Inventory positioning in multiple product supply chains

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Article ID: iaor20042443
Country: Netherlands
Volume: 126
Issue: 1
Start Page Number: 195
End Page Number: 213
Publication Date: Feb 2004
Journal: Annals of Operations Research
Authors: , ,
Keywords: supply chain
Abstract:

In this paper we address the problem of inventory positioning, i.e., the determination of the supply chain node where inventory should be held, to minimize holding costs given a pre-specified order fill rate. A single-echelon inventory system with multiple products models the problem. The value of inventory is assumed to be an increasing function of the amount of processing performed at upstream nodes, while achieved fill-rates are dependent on the distance or time between the inventory storage and customer locations. We propose a novel analytical approach to solve the problem for the case of normally distributed demand that is based on iterative calculations of inventory holding costs at the various potential inventory locations.

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