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Exact analysis of divergent inventory systems with time-based shipment consolidation and compound poisson demand

Stenius, Olle LU ; Karaarslan, Ayşe Gönül; Marklund, Johan LU and De Kok, A. G. (2016) In Operations Research 64(4). p.906-921
Abstract

Sustainable and efficient management of a distribution system requires coordination between transportation planning and inventory control decisions. In this context, we consider a one warehouse multi-retailer inventory system with a time-based shipment consolidation policy at the warehouse. This means that there are fixed costs associated with each shipment, and retailer orders are consolidated and shipped periodically to groups of retailers sharing the same delivery routes. Customer demand is compound Poisson distributed and unsatisfied demand at each stock point is backordered and allocated on a first-come first-served basis. The system is centralized and inventory levels are reviewed continuously. The warehouse has access to... (More)

Sustainable and efficient management of a distribution system requires coordination between transportation planning and inventory control decisions. In this context, we consider a one warehouse multi-retailer inventory system with a time-based shipment consolidation policy at the warehouse. This means that there are fixed costs associated with each shipment, and retailer orders are consolidated and shipped periodically to groups of retailers sharing the same delivery routes. Customer demand is compound Poisson distributed and unsatisfied demand at each stock point is backordered and allocated on a first-come first-served basis. The system is centralized and inventory levels are reviewed continuously. The warehouse has access to real-time inventory information from the retailers, and uses a 4R1nQ5 policy to replenish from an outside supplier/manufacturer. We derive the exact probability distributions for the inventory levels at the retailers, and use these to obtain exact expressions for the system's expected shipment, holding and backorder costs, its average inventory levels, and fill rates. Based on the analytical properties of the objective function, we construct an optimization procedure by deriving bounds on the optimal reorder levels and shipment intervals both for single-item and multi-item systems.

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Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Compound Poisson demand, Continuous review, Inventory, Multi-item, Multiechelon, Shipment consolidation, Stochastic
in
Operations Research
volume
64
issue
4
pages
16 pages
publisher
Inst Operations Research Management Sciences
external identifiers
  • scopus:84982085249
  • wos:000381917500008
ISSN
0030-364X
DOI
10.1287/opre.2016.1510
language
English
LU publication?
yes
id
f09d36d0-c9b8-4ac2-a913-13f3a9d31210
date added to LUP
2017-01-17 15:43:30
date last changed
2017-10-01 05:29:00
@article{f09d36d0-c9b8-4ac2-a913-13f3a9d31210,
  abstract     = {<p>Sustainable and efficient management of a distribution system requires coordination between transportation planning and inventory control decisions. In this context, we consider a one warehouse multi-retailer inventory system with a time-based shipment consolidation policy at the warehouse. This means that there are fixed costs associated with each shipment, and retailer orders are consolidated and shipped periodically to groups of retailers sharing the same delivery routes. Customer demand is compound Poisson distributed and unsatisfied demand at each stock point is backordered and allocated on a first-come first-served basis. The system is centralized and inventory levels are reviewed continuously. The warehouse has access to real-time inventory information from the retailers, and uses a 4R1nQ5 policy to replenish from an outside supplier/manufacturer. We derive the exact probability distributions for the inventory levels at the retailers, and use these to obtain exact expressions for the system's expected shipment, holding and backorder costs, its average inventory levels, and fill rates. Based on the analytical properties of the objective function, we construct an optimization procedure by deriving bounds on the optimal reorder levels and shipment intervals both for single-item and multi-item systems.</p>},
  author       = {Stenius, Olle and Karaarslan, Ayşe Gönül and Marklund, Johan and De Kok, A. G.},
  issn         = {0030-364X},
  keyword      = {Compound Poisson demand,Continuous review,Inventory,Multi-item,Multiechelon,Shipment consolidation,Stochastic},
  language     = {eng},
  month        = {07},
  number       = {4},
  pages        = {906--921},
  publisher    = {Inst Operations Research Management Sciences},
  series       = {Operations Research},
  title        = {Exact analysis of divergent inventory systems with time-based shipment consolidation and compound poisson demand},
  url          = {http://dx.doi.org/10.1287/opre.2016.1510},
  volume       = {64},
  year         = {2016},
}