Exact Analysis of Continuous Review (<i>R,Q</i>) Policies in Two-Echelon Inventory Systems with Compound Poisson Demand

Axsäter, Sven

doi:10.1287/opre.48.5.686.12403

Cited by 102 publications

(60 citation statements)

References 16 publications

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“…This makes the analysis of the operating characteristics of the system complicated. In fact, there are only a few studies that deal with such distribution systems even under the traditional (Q, R) policies (e.g., Forsberg, 1997;Axsater, 2000). Hence, the failure rate function of U is…”

Section: Discussionmentioning

confidence: 99%

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Incorporating a delay mechanism in ordering policies into multi-echelon distribution systems

Moinzadeh

Zhou

2008

IIE Transactions

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In this paper, we devise a framework for obtaining the optimal ordering policy in a single location, continuous-review inventory system with arbitrary inter-demand times. We show that it is optimal to order at demand arrival epochs only if the inter-demand time has a constant or decreasing failure rate. When the inter-demand time has an increasing failure rate, we show that the optimal policy is to delay the order. We then extend this policy to multi-echelon distribution systems consisting of one supplier and many retailers. Both decentralized and centralized systems are considered. We derive expressions and procedures for the evaluation of the total cost and the computation of optimal delay in all the considered settings. More importantly, we study the impact of our delay policy in all the settings. The numerical results indicate that for the single-location model, the optimal delay can significantly reduce the total cost. Results from the single-location model can be applied to the decentralized multi-echelon system, where the upstream supplier acts as a single-location system. The supplier order delay can also have a significant impact (either positive or negative) on the retailers' total cost as well as the system's total costs. Finally, the impact of supplier order delay is minimal in the centralized multi-echelon setting. We offer an intuitive explanation for this observation.

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Section: Discussionmentioning

confidence: 99%

“…When the retailers are non-identical, the analysis becomes very complicated. One may need to keep track of each sub-batch as did Forsberg (1997) and Axsater (2000). We will not carry out that analysis in this paper, and consider this a challenging but important future research topic.…”

Section: Centralized Settingmentioning

confidence: 99%

Incorporating a delay mechanism in ordering policies into multi-echelon distribution systems

Moinzadeh

Zhou

2008

IIE Transactions

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“…The following papers show how sharing demand and inventory data can improve the supplier's order quantity decisions in models with known and stationary retailer demand: Bourland et al (1996), Chen (1998), 1 Campbell Soup Company gave us ordering data from several retailers before and after the implementation of information technology. In the "before" data we saw that retailers often purchased in multiple pallet quantities because, according to our contacts at Campbell Soup Company, they did not want to bother with the hassle of placing orders frequently.…”

Section: Literature Reviewmentioning

confidence: 99%

“…There are many studies that investigate a supply chain model with one supplier, N retailers, stochastic consumer demand, and batch ordering. Some of them assume traditional information (e.g., Axsäter 1993, Cachon 1995, Chen and Samroengraja 1996, Lee and Moinzadeh 1986, Svoronos and Zipkin 1988, while others assume full information (e.g., Chen and Zheng 1997, Graves 1996, McGavin et al 1993. Because of different assumptions and test problems, it is not possible to meaningfully compare supply chain costs across those two sets of studies.…”

Section: Cachon and Fisher Supply Chain Inventory Managementmentioning

confidence: 99%

Supply Chain Inventory Management and the Value of Shared Information

2000

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I n traditional supply chain inventory management, orders are the only information firms exchange, but information technology now allows firms to share demand and inventory data quickly and inexpensively. We study the value of sharing these data in a model with one supplier, N identical retailers, and stationary stochastic consumer demand. There are inventory holding costs and back-order penalty costs. We compare a traditional information policy that does not use shared information with a full information policy that does exploit shared information. In a numerical study we find that supply chain costs are 2.2% lower on average with the full information policy than with the traditional information policy, and the maximum difference is 12.1%. We also develop a simulation-based lower bound over all feasible policies. The cost difference between the traditional information policy and the lower bound is an upper bound on the value of information sharing: In the same study, that difference is 3.4% on average, and no more than 13.8%. We contrast the value of information sharing with two other benefits of information technology, faster and cheaper order processing, which lead to shorter lead times and smaller batch sizes, respectively. In our sample, cutting lead times nearly in half reduces costs by 21% on average, and cutting batches in half reduces costs by 22% on average. For the settings we study, we conclude that implementing information technology to accelerate and smooth the physical flow of goods through a supply chain is significantly more valuable than using information technology to expand the flow of information.

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“…See e.g. Axsater [4,5] and the references therein for this line of research. Exact methods for classical, periodic-review, multi-echelon models are available too; see e.g.…”

Section: Introductionmentioning

confidence: 99%

Exact and Approximate Analysis of Multi-Echelon, Multi-Indenture Spare Parts Systems with Commonality

Rustenburg¹,

Houtum

Zijm

2003

International Series in Operations Research &Amp; Management Science

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Exact Analysis of Continuous Review (R,Q) Policies in Two-Echelon Inventory Systems with Compound Poisson Demand

Cited by 102 publications

References 16 publications

Incorporating a delay mechanism in ordering policies into multi-echelon distribution systems

Incorporating a delay mechanism in ordering policies into multi-echelon distribution systems

Supply Chain Inventory Management and the Value of Shared Information

Exact and Approximate Analysis of Multi-Echelon, Multi-Indenture Spare Parts Systems with Commonality

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