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A model for heuristic coordination of real life distribution inventory systems with lumpy demand

Berling, Peter LU and Marklund, Johan LU (2013) In European Journal of Operational Research 230(3). p.515-526
Abstract
This paper presents an approximation model for optimizing reorder points in one-warehouse N-retailer inventory systems subject to highly variable lumpy demand. The motivation for this work stems from close cooperation with a supply chain management software company, Syncron International, and one of their customers, a global spare parts provider. The model heuristically coordinates the inventory system using a near optimal induced backorder cost at the central warehouse. This induced backorder cost captures the impact that a reorder point decision at the warehouse has on the retailers' costs, and decomposes the multi-echelon problem into solving N + 1 single-echelon problems. The decomposition framework renders a flexible model that is... (More)
This paper presents an approximation model for optimizing reorder points in one-warehouse N-retailer inventory systems subject to highly variable lumpy demand. The motivation for this work stems from close cooperation with a supply chain management software company, Syncron International, and one of their customers, a global spare parts provider. The model heuristically coordinates the inventory system using a near optimal induced backorder cost at the central warehouse. This induced backorder cost captures the impact that a reorder point decision at the warehouse has on the retailers' costs, and decomposes the multi-echelon problem into solving N + 1 single-echelon problems. The decomposition framework renders a flexible model that is computationally and conceptually simple enough to be implemented in practice. A numerical study, including real data from the case company, shows that the new model performs very well in comparison to existing methods in the literature, and offers significant improvements to the case company. With regards to the latter, the new model in general obtains realized service levels much closer to target while reducing total inventory. (C) 2013 Elsevier B.V. All rights reserved. (Less)
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author
and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Inventory/production, Multi-echelon, Policies, Continuous review, Stochastic, Poisson demand
in
European Journal of Operational Research
volume
230
issue
3
pages
515 - 526
publisher
Elsevier
external identifiers
  • wos:000322055400007
  • scopus:84879504899
ISSN
0377-2217
DOI
10.1016/j.ejor.2013.04.053
language
English
LU publication?
yes
id
d4c421d0-e433-4de2-be32-dbed1bdd6911 (old id 4050278)
date added to LUP
2016-04-01 09:55:51
date last changed
2020-04-29 01:01:59
@article{d4c421d0-e433-4de2-be32-dbed1bdd6911,
  abstract     = {This paper presents an approximation model for optimizing reorder points in one-warehouse N-retailer inventory systems subject to highly variable lumpy demand. The motivation for this work stems from close cooperation with a supply chain management software company, Syncron International, and one of their customers, a global spare parts provider. The model heuristically coordinates the inventory system using a near optimal induced backorder cost at the central warehouse. This induced backorder cost captures the impact that a reorder point decision at the warehouse has on the retailers' costs, and decomposes the multi-echelon problem into solving N + 1 single-echelon problems. The decomposition framework renders a flexible model that is computationally and conceptually simple enough to be implemented in practice. A numerical study, including real data from the case company, shows that the new model performs very well in comparison to existing methods in the literature, and offers significant improvements to the case company. With regards to the latter, the new model in general obtains realized service levels much closer to target while reducing total inventory. (C) 2013 Elsevier B.V. All rights reserved.},
  author       = {Berling, Peter and Marklund, Johan},
  issn         = {0377-2217},
  language     = {eng},
  number       = {3},
  pages        = {515--526},
  publisher    = {Elsevier},
  series       = {European Journal of Operational Research},
  title        = {A model for heuristic coordination of real life distribution inventory systems with lumpy demand},
  url          = {http://dx.doi.org/10.1016/j.ejor.2013.04.053},
  doi          = {10.1016/j.ejor.2013.04.053},
  volume       = {230},
  year         = {2013},
}