Coordination mechanisms for inventory control in three-echelon serial and distribution systems

Coordination mechanisms for inventory control in three-echelon serial and distribution systems

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Article ID: iaor2009290
Country: Netherlands
Volume: 158
Issue: 1
Start Page Number: 161
End Page Number: 182
Publication Date: Feb 2008
Journal: Annals of Operations Research
Authors: ,
Keywords: game theory, inventory
Abstract:

This paper is concerned with the coordination of inventory control in three-echelon serial and distribution systems under decentralized control. All installations in these supply chains track echelon inventories. Under decentralized control the installations will decide upon base stock levels that minimize their own inventory costs. In general these levels do not coincide with the optimal base stock levels in the global optimum of the chain under centralized control. Hence, the total cost under decentralized control is larger than under centralized control. To remove this cost inefficiency, two simple coordination mechanisms are presented: one for serial systems and one for distribution systems.

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