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A Simple Decision Rule for Decentralized Two-Echelon Inventory Control

Axsäter, Sven LU (2005) In International Journal of Production Economics 93-94. p.53-59
Abstract
We consider a two-echelon distribution inventory system with a central warehouse and a number of retailers. The retailers face stochastic demand. The system is controlled by continuous review installation stock (R,Q) policies with given batch quantities. One way to decentralize the system control is to provide a backorder cost to the warehouse, and let the warehouse choose its reorder point so that the sum of the expected holding and backorder costs are minimized. Given the resulting warehouse policy, the retailers similarly optimize their costs with respect to the reorder points. This paper provides a simple approximate technique for determining the backorder cost to be used by the warehouse.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
International Journal of Production Economics
volume
93-94
pages
53 - 59
publisher
Elsevier
external identifiers
  • wos:000225423600006
  • scopus:9544237151
ISSN
0925-5273
DOI
10.1016/j.ijpe.2004.06.005
language
English
LU publication?
yes
id
6afa92c9-fc3c-48a4-82c2-30aff08f49fc (old id 636977)
date added to LUP
2008-02-04 12:24:26
date last changed
2017-01-01 07:21:20
@article{6afa92c9-fc3c-48a4-82c2-30aff08f49fc,
  abstract     = {We consider a two-echelon distribution inventory system with a central warehouse and a number of retailers. The retailers face stochastic demand. The system is controlled by continuous review installation stock (R,Q) policies with given batch quantities. One way to decentralize the system control is to provide a backorder cost to the warehouse, and let the warehouse choose its reorder point so that the sum of the expected holding and backorder costs are minimized. Given the resulting warehouse policy, the retailers similarly optimize their costs with respect to the reorder points. This paper provides a simple approximate technique for determining the backorder cost to be used by the warehouse.},
  author       = {Axsäter, Sven},
  issn         = {0925-5273},
  language     = {eng},
  pages        = {53--59},
  publisher    = {Elsevier},
  series       = {International Journal of Production Economics},
  title        = {A Simple Decision Rule for Decentralized Two-Echelon Inventory Control},
  url          = {http://dx.doi.org/10.1016/j.ijpe.2004.06.005},
  volume       = {93-94},
  year         = {2005},
}