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Age-based inventory control in a multi-echelon system with emergency replenishments

Johansson, Lina LU and Olsson, Fredrik LU (2017) In European Journal of Operational Research
Abstract

This paper deals with a two-echelon spare parts inventory system with one central warehouse and a number of local warehouses facing Poisson demand. Normally, the local warehouses replenish stock from the central warehouse. However, if a demand cannot be satisfied within a pre-determined time window, an emergency shipment is requested from an outside supplier. Moreover, as in practice, this outside emergency supplier may not have ample capacity at the moment when the order was requested. This means that it is not always possible to realize such an emergency shipment within the stipulated time window. In many cases there are service agreements between the spare parts provider and the customer, that state the penalty cost if a customer... (More)

This paper deals with a two-echelon spare parts inventory system with one central warehouse and a number of local warehouses facing Poisson demand. Normally, the local warehouses replenish stock from the central warehouse. However, if a demand cannot be satisfied within a pre-determined time window, an emergency shipment is requested from an outside supplier. Moreover, as in practice, this outside emergency supplier may not have ample capacity at the moment when the order was requested. This means that it is not always possible to realize such an emergency shipment within the stipulated time window. In many cases there are service agreements between the spare parts provider and the customer, that state the penalty cost if a customer demand is not met within an acceptable time window. The cost structure of such penalties is typically non-linear, and in this setting we consider piecewise constant penalty costs. That is, in cases where it is not possible to realize an emergency shipment from the outside supplier, a significant fixed cost is incurred. From a sustainability perspective, we also consider the production waste that arises from production stops when the time window is exceeded, and unplanned production stops lead to waste of perishable raw materials. We quantify the expected total CO2 emissions related to production waste and transportations connected to emergency shipments. In particular we show that it is important to take a more holistic view on CO2 emissions, and not only consider emissions related to transportation (as in most of the related literature).

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author
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
Emergency replenishments, Inventory, Multi-echelon, Non-linear backorder cost, Sustainability
in
European Journal of Operational Research
publisher
Elsevier
external identifiers
  • scopus:85029480105
  • wos:000417657200012
ISSN
0377-2217
DOI
10.1016/j.ejor.2017.08.057
language
English
LU publication?
yes
id
9e94014d-49d1-460a-856e-7d56b3e1f979
date added to LUP
2017-10-04 11:01:06
date last changed
2018-01-16 13:20:37
@article{9e94014d-49d1-460a-856e-7d56b3e1f979,
  abstract     = {<p>This paper deals with a two-echelon spare parts inventory system with one central warehouse and a number of local warehouses facing Poisson demand. Normally, the local warehouses replenish stock from the central warehouse. However, if a demand cannot be satisfied within a pre-determined time window, an emergency shipment is requested from an outside supplier. Moreover, as in practice, this outside emergency supplier may not have ample capacity at the moment when the order was requested. This means that it is not always possible to realize such an emergency shipment within the stipulated time window. In many cases there are service agreements between the spare parts provider and the customer, that state the penalty cost if a customer demand is not met within an acceptable time window. The cost structure of such penalties is typically non-linear, and in this setting we consider piecewise constant penalty costs. That is, in cases where it is not possible to realize an emergency shipment from the outside supplier, a significant fixed cost is incurred. From a sustainability perspective, we also consider the production waste that arises from production stops when the time window is exceeded, and unplanned production stops lead to waste of perishable raw materials. We quantify the expected total CO<sub>2</sub> emissions related to production waste and transportations connected to emergency shipments. In particular we show that it is important to take a more holistic view on CO<sub>2</sub> emissions, and not only consider emissions related to transportation (as in most of the related literature).</p>},
  author       = {Johansson, Lina and Olsson, Fredrik},
  issn         = {0377-2217},
  keyword      = {Emergency replenishments,Inventory,Multi-echelon,Non-linear backorder cost,Sustainability},
  language     = {eng},
  month        = {09},
  publisher    = {Elsevier},
  series       = {European Journal of Operational Research},
  title        = {Age-based inventory control in a multi-echelon system with emergency replenishments},
  url          = {http://dx.doi.org/10.1016/j.ejor.2017.08.057},
  year         = {2017},
}