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Stock Rationing in a Continuous Review Two-Echelon Inventory Model

Axsäter, Sven LU ; Kleijn, M and De Kok, TG (2004) In Annals of Operations Research 126(1-4). p.177-194
Abstract
In this paper we consider a 1-warehouse, N-retailer inventory system where demand occurs at all locations. We introduce an inventory model which allows us to set different service levels for retailers and direct customer demand at the warehouse. For each retailer a critical level is defined, such that a retailer replenishment order is delivered from warehouse stock if and only if the stock level exceeds this critical level. It is assumed that retailer replenishment orders, which are not satisfied from warehouse stock, are delivered directly from the outside supplier, instead of being backlogged. We present an analytical upper bound on the total cost of the system, and develop a heuristic method to optimize the policy parameters. Numerical... (More)
In this paper we consider a 1-warehouse, N-retailer inventory system where demand occurs at all locations. We introduce an inventory model which allows us to set different service levels for retailers and direct customer demand at the warehouse. For each retailer a critical level is defined, such that a retailer replenishment order is delivered from warehouse stock if and only if the stock level exceeds this critical level. It is assumed that retailer replenishment orders, which are not satisfied from warehouse stock, are delivered directly from the outside supplier, instead of being backlogged. We present an analytical upper bound on the total cost of the system, and develop a heuristic method to optimize the policy parameters. Numerical experiments indicate that our technique provides a very close approximation of the exact cost. Also, we show that differentiating among the retailers and direct customer demand can yield significant cost reductions. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
allocation policy, multi-echelon, stochastic
in
Annals of Operations Research
volume
126
issue
1-4
pages
177 - 194
publisher
Kluwer
external identifiers
  • wos:000188211900008
  • scopus:4043158629
ISSN
1572-9338
DOI
10.1023/B:ANOR.0000012280.68155.a3
language
English
LU publication?
yes
id
ee1a32bb-9f7e-4d0a-9292-ed8ed87b9258 (old id 1274235)
date added to LUP
2011-06-17 10:47:19
date last changed
2017-04-16 04:14:53
@article{ee1a32bb-9f7e-4d0a-9292-ed8ed87b9258,
  abstract     = {In this paper we consider a 1-warehouse, N-retailer inventory system where demand occurs at all locations. We introduce an inventory model which allows us to set different service levels for retailers and direct customer demand at the warehouse. For each retailer a critical level is defined, such that a retailer replenishment order is delivered from warehouse stock if and only if the stock level exceeds this critical level. It is assumed that retailer replenishment orders, which are not satisfied from warehouse stock, are delivered directly from the outside supplier, instead of being backlogged. We present an analytical upper bound on the total cost of the system, and develop a heuristic method to optimize the policy parameters. Numerical experiments indicate that our technique provides a very close approximation of the exact cost. Also, we show that differentiating among the retailers and direct customer demand can yield significant cost reductions.},
  author       = {Axsäter, Sven and Kleijn, M and De Kok, TG},
  issn         = {1572-9338},
  keyword      = {allocation policy,multi-echelon,stochastic},
  language     = {eng},
  number       = {1-4},
  pages        = {177--194},
  publisher    = {Kluwer},
  series       = {Annals of Operations Research},
  title        = {Stock Rationing in a Continuous Review Two-Echelon Inventory Model},
  url          = {http://dx.doi.org/10.1023/B:ANOR.0000012280.68155.a3},
  volume       = {126},
  year         = {2004},
}