Lower Bounds and Heuristics for Supply Chain Stock Allocation

Marklund, Johan; Rosling, Kaj

doi:10.1287/opre.1110.1009

Cited by 46 publications

(32 citation statements)

References 33 publications

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“…The balance assumption has been widely applied in inventory study. Literature that uses or relies on the balance assumption includes the works in [5,[8][9][10][11][12][13][14][15][16], and references therein.…”

Section: Allocation Policy At the Warehousementioning

confidence: 99%

A Two-Echelon Inventory System with a Minimum Order Quantity Requirement

2019

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In this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particularly, as stipulated by the supplier, there is a minimum order quantity (MOQ) requirement for the warehouse. That is, the warehouse must order either none or at least as much as the MOQ. To investigate this system analytically, we assume retailers adopt the base-stock policy, and we design for the warehouse a new heuristic ordering policy, called refined base-stock policy, which conforms to the MOQ requirement. Moreover, in the case of shortages, we assume the warehouse adopts a virtual allocation policy, and therefore the orders for individual units are filled in the same order as the original demands at the retailers. To evaluate the long-run average system cost exactly, we present a position-based cost-accounting scheme, in which the cost associated with each unit is assigned to its first position at the warehouse. We also derive lower and upper bounds of the inventory parameters, facilitating the search for the optimal policy that minimizes the long-run average system cost.

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Section: Allocation Policy At the Warehousementioning

confidence: 99%

A Two-Echelon Inventory System with a Minimum Order Quantity Requirement

2019

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“…Inventory management and inventory control is a well-discussed field, not surprisingly there are a high number of publications with diverse focus projections (cf. Axsäter et al [30]; Berling and Marlund [31]; Marklund and Rosling [32]). However, the main principles behind inventory management are similar throughout the literature, i.e.…”

Section: Inventory Controlmentioning

confidence: 99%

Product-Service System in inventory control: A new paradigm?

Ismail

Morton

Harding

et al. 2015

2015 International Conference on Industrial Engineering and Operations Management (IEOM)

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Manufacturing organisations are facing new challenges as competition has become global. Manufacturing industry continues moreover to make manufacturing in production variance more flexible and responsive by looking deeper and more critically into all aspects of its operation. A Product-Service System (PSS) embraces the product and service continuum as one system. Little is known about where the boundaries of PSS should lie as it needs to integrate both external and internal elements in managing inventory control within a turbulent environment in which are major dominant costs include many areas of uncertainty related to the condition, maintenance and replacement of product components. A new improved inventory control system is called for that deals with manufacturers' core operational activities in a more realistic manner. This research is focused on investigating the value and validity of introducing a PSS inventory control system. The research will led to a new approach for dealing with inventory control and contributes not only to understanding of the PSS paradigm in manufacturing industries but will also impact on their sales and profits.

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“…Many studies use the balance assumption because of its mathematical tractability. However, the balance assumption does not always provide a good approximation, for example, in situations where the order cycles are long, the demand variability is high, and the retailers are very different in terms of service requirements and demand characteristics (Axsäter 2002, Marklund and Rosling 2012, Dogru et al 2009. Other literature focuses on specific heuristic allocation policy.…”

Section: Literature Reviewmentioning

confidence: 99%

“…For each of the 378 cases, we first use the heuristic dynamic allocation policy we proposed and find a reasonable good solution S h 0 . For a fair comparison of allocation policies, we use the same S h 0 for myopic optimal allocation and virtual allocation (Marklund and Rosling 2012). As there are only two types of retailers, we are able to find the optimal S for myopic optimal allocation and virtual allocation with given S h 0 by enumeration approach using lower bounds and upper bounds.…”

Section: Heuristic Dynamic Allocation Policymentioning

confidence: 99%

“…Van der Heijden (1999) considered similar setting except when facing a shortage, the warehouse will allocate retailers according to predetermined fixed proportions. He proposed an approximate approach to determine the rationing policy and order-up-to level separately for all stockpoints to satisfy a given fill rate at each retailer Marklund and Rosling (2012). formulated a stochastic dynamic programming problem to solve how a warehouse should allocate a given amount of stock to N retailers, when m time periods until the next warehouse replenishment arrives.…”

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confidence: 99%

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Essays on multi-echelon inventory control

Wan¹

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Matching demand with supply effectively is a significant objective for supply chain inventory management. Efficient supply chain management requires the effective coordination of shipments from one stage to the next throughout the entire system. The first essay of this thesis studies fixed-interval ordering policies in a serial system. In particular we consider an echelon-stock fixedinterval order-up-to policy for an N-stage serial supply chain. For reasons of mathematical tractability and historic convention, previous studies on periodic-review inventory control policies have typically accounted system costs at the end of each review period. This accounting method, however, often significantly underestimates system costs when inventory related costs actually accrue in continuous time. The main contribution of the current study is twofold. First, we provide a simple approach to evaluate the inventory related costs in the system continuously in time. This evaluation approach uses only the demand distribution, is easy to follow and compute and can also be used when end-of-period cost accounting is adopted. Second, we provide an intuitive characterization of an optimal ordering policy by simply equating the marginal echelon inventory related cost to the inventory holding cost at the upstream stage. This leads to a simple bottom-up procedure to identify an optimal ordering policy for a given replenishment schedule. Using this solution, we develop a topdown search procedure to identify an optimal replenishment schedule subject to the optimization of the ordering policy. The second essay of this thesis considers a two-level distribution system, in which one central warehouse orders from an external supplier in an interval of a fixed length to supply a group of non-identical retailers. The retailers face independent Poisson processes and order from the warehouse in fixed intervals that are integer-ratio multiples of the warehouse replenishment interval. Optimal inventory control policies for two-level distribution systems are notoriously complicated because of the stock allocation problem when shortage occurs at the warehouse. However, finding warehouse stock allocation policies that are optimal or near-optimal and easy to implement is of practical importance. We assume that the system adopts a base-stock policy, in which the warehouse orders at each review point from the external supplier to raise the echelon-stock inventory position to a fixed base stock level. We investigate different allocation policies for the warehouse to allocate stock to retailers. First, we consider a class of stationary ship-up-to-S policy, in which each retailer's inventory position is raised to a fixed base-stock level at a shipping point. When facing a shortage, we consider two myopic allocation policies: (1) virtual allocation, where the remaining stock is allocated to satisfy the demand on a first-come first-served basis, (2) myopic optimal allocation, where the remaining stock is allocated to the retailers optimally to minimize system co...

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Lower Bounds and Heuristics for Supply Chain Stock Allocation

Cited by 46 publications

References 33 publications

A Two-Echelon Inventory System with a Minimum Order Quantity Requirement

A Two-Echelon Inventory System with a Minimum Order Quantity Requirement

Product-Service System in inventory control: A new paradigm?

Essays on multi-echelon inventory control

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