A decision rule for coordination of inventory and transportation in a two‐stage supply chain with alternative supply sources

A decision rule for coordination of inventory and transportation in a two‐stage supply chain with alternative supply sources

0.00 Avg rating0 Votes
Article ID: iaor20114740
Volume: 38
Issue: 12
Start Page Number: 1696
End Page Number: 1704
Publication Date: Dec 2011
Journal: Computers and Operations Research
Authors: , ,
Keywords: distribution
Abstract:

This paper deals with a two‐stage supply chain that consists of two distribution centers and two retailers. Each member of the supply chain uses a (Q,R) inventory policy, and incurs standard inventory holding and backlog costs, as well as ordering and transportation costs. The distribution centers replenish their inventory from an outside supplier, and the retailers replenish inventory from one of the two distribution centers. When a retailer is ready to replenish its inventory that retailer must decide whether it should replenish from the first or second distribution center. We develop a decision rule that minimizes the total expected cost associated with all outstanding orders at the time of order placement; the retailers then repeatedly use this decision rule as a heuristic. A simulation study which compares the proposed policy to three traditional ordering policies illustrates how the proposed policy performs under different conditions. The numerical analysis shows that, over a large set of scenarios, the proposed policy outperforms the other three policies on average.

Reviews

Required fields are marked *. Your email address will not be published.