A committed delivery strategy with fixed frequency and quantity

A committed delivery strategy with fixed frequency and quantity

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Article ID: iaor20042631
Country: Netherlands
Volume: 148
Issue: 2
Start Page Number: 363
End Page Number: 373
Publication Date: Jul 2003
Journal: European Journal of Operational Research
Authors: ,
Keywords: inventory
Abstract:

We analyze a supply chain environment in which a distributor facing price-sensitive demand has the opportunity to contractually commit to a delivery quantity at regular intervals over a finite horizon in exchange for a per-unit cost reduction for units acquired via committed delivery. Supplemental orders needed to meet demand are purchased at an additional unit cost. For normally distributed demand, we use a simulation-based approximation to develop models yielding closed-form solutions for the optimal quantity and resell price for the distributor. Inventory, ordering and pricing implications for this “committed delivery strategy” are investigated.

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