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Optimal "Position-Based" Warehouse Ordering in Divergent Two-Echelon Inventory Systems

Axsäter, Sven LU and Marklund, Johan LU (2008) In Operations Research 56(4). p.976-991
Abstract
A continuous-review two-echelon inventory system with one central warehouse and a number of nonidentical retailers is considered. The retailers face independent Poisson demand and apply standard (R, Q) policies. The retailer order quantities are fixed integer multiples of a certain batch size, representing the smallest pallet or container size transported in the system. A warehouse order may consist of one or several such batches. We derive a new policy for warehouse ordering, which is optimal in the broad class of position-based policies relying on complete information about the retailer inventory positions, transportation times, cost structures, and demand distributions at all facilities. The exact analysis of the new policy includes a... (More)
A continuous-review two-echelon inventory system with one central warehouse and a number of nonidentical retailers is considered. The retailers face independent Poisson demand and apply standard (R, Q) policies. The retailer order quantities are fixed integer multiples of a certain batch size, representing the smallest pallet or container size transported in the system. A warehouse order may consist of one or several such batches. We derive a new policy for warehouse ordering, which is optimal in the broad class of position-based policies relying on complete information about the retailer inventory positions, transportation times, cost structures, and demand distributions at all facilities. The exact analysis of the new policy includes a method for determining the expected total inventory holding and backorder costs for the entire system. The class of position-based policies encompasses both the traditional installation-stock and echelon-stock (R, Q) policies, as well as the more sophisticated policies recently analyzed in the literature. The value of more carefully incorporating a richer information structure into the warehouse ordering policy is illustrated in a numerical study. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Operations Research
volume
56
issue
4
pages
976 - 991
publisher
Inst Operations Research Management Sciences
external identifiers
  • wos:000259290100012
  • scopus:61349104805
ISSN
0030-364X
DOI
10.1287/opre.1080.0560
language
English
LU publication?
yes
id
f45fe3fc-f97f-45c6-b3c0-a306818db643 (old id 1039061)
date added to LUP
2008-02-27 08:35:00
date last changed
2017-09-10 03:59:52
@article{f45fe3fc-f97f-45c6-b3c0-a306818db643,
  abstract     = {A continuous-review two-echelon inventory system with one central warehouse and a number of nonidentical retailers is considered. The retailers face independent Poisson demand and apply standard (R, Q) policies. The retailer order quantities are fixed integer multiples of a certain batch size, representing the smallest pallet or container size transported in the system. A warehouse order may consist of one or several such batches. We derive a new policy for warehouse ordering, which is optimal in the broad class of position-based policies relying on complete information about the retailer inventory positions, transportation times, cost structures, and demand distributions at all facilities. The exact analysis of the new policy includes a method for determining the expected total inventory holding and backorder costs for the entire system. The class of position-based policies encompasses both the traditional installation-stock and echelon-stock (R, Q) policies, as well as the more sophisticated policies recently analyzed in the literature. The value of more carefully incorporating a richer information structure into the warehouse ordering policy is illustrated in a numerical study.},
  author       = {Axsäter, Sven and Marklund, Johan},
  issn         = {0030-364X},
  language     = {eng},
  number       = {4},
  pages        = {976--991},
  publisher    = {Inst Operations Research Management Sciences},
  series       = {Operations Research},
  title        = {Optimal "Position-Based" Warehouse Ordering in Divergent Two-Echelon Inventory Systems},
  url          = {http://dx.doi.org/10.1287/opre.1080.0560},
  volume       = {56},
  year         = {2008},
}