Multi-class dynamic inventory rationing with stochastic demands and backordering

Liu, Shudong; Song, Miao; Tan, Kok Choon; Zhang, Changyong

doi:10.1016/j.ejor.2015.01.022

Cited by 20 publications

(11 citation statements)

References 29 publications

(40 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Liu at al. study the problem of inventory rationing with multiple demand classes and sales losses[12]. The optimal rationing strategy is a combination of the dynamic policy in the replenishment lead time and the static strategy before the order is placed.…”

Section: Literature Reviewmentioning

confidence: 99%

Inventory rationing policy and backup supply with two classes of customers

Liu

Wei

2019

PLoS ONE

View full text Add to dashboard Cite

In this paper, we consider joint decisions on inventory rationing and replenishment from a regular supplier or a backup supplier with two classes of customers. When the on-hand inventory falls below a certain critical level, an inventory rationing policy is implemented to reject lower priority customers. We investigated the potential use of a backup supplier as a response to inventory rationing policy. First, we establish an inventory level transition equilibrium equation for the steady-state inventory level probability distributions and derive analytical steady-state performance indicators. Next, the inventory cost function and the nonlinear optimization model are characterized. We use real-coded genetic algorithm (RCGA) to search for the optimal joint decisions. Finally, the proposed algorithm and the joint decisions are investigated with different inventory service polices through numerical experiments. The results show that the inventory rationing policy (IRP) is superior to the traditional priority service policy (CPSP) and the common first-come-first service policy (FCFSP). The backup supply can reduce inventory costs with high arrival intensity.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Inventory rationing policy and backup supply with two classes of customers

Liu

Wei

2019

PLoS ONE

View full text Add to dashboard Cite

show abstract

“…It showed that about 20% of the unsatisfied customers would like to accept the backorders in a stockout situation (Gruen and Corsten [1]). Since such a backordering is helpful to rescue the lost sales, some researchers give full consideration to the study on backordering in newsvendor model (see [2][3][4][5][6][7][8][9][10][11][12]). Montgomery et al [2] introduced an exact solution procedure to select the optimal order quantity of a newsvendor model with fixed partial backordering.…”

Section: Introductionmentioning

confidence: 99%

“…Chen et al [8] designed two compensation mechanisms to control backordering in a stockout situation. Liu et al [9] developed an innovative two-step approach by the certainty equivalence principle to solve the inventory problem with backordering. Hsu and Hsu [10] developed economic production quantity models to select the optimal production lot size and backorder quantity.…”

Section: Introductionmentioning

confidence: 99%

Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Liu

Chan

2019

Mathematics

View full text Add to dashboard Cite

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

show abstract

“…Fadiloglu and Bulut (2010) show that a dynamic rationing policy, which allows the critical level to change, can outperform a constant critical-level policy. The interested reader can refer to Hung et al (2012), Chew et al (2013), Wang and Tang (2014) and Liu et al (2015) for recent findings on dynamic rationing policies.…”

Section: Inventory Rationingmentioning

confidence: 99%

Transshipment policies for systems with multiple retailers and two demand classes

2017

View full text Add to dashboard Cite

Many retailers discriminate among their customers based on their value to the firm. Instead of losing a customer due to this discrimination or lack of inventory, a retailer might prefer to place a transshipment request with other retailers to satisfy the customer's demand. The system as a whole can benefit from this type of transshipments. In this paper, we study a problem of a centrally controlled system with multiple retailers. Each retailer serves two types of customers: high priority and low priority. Each retailer employs a rationing policy with a rationing level k in the context of a continuous-review (r, Q) inventory replenishment model. The overall policy is referred to as an (r, k, Q) policy. Retailers can transship items from either other retailers or a more expensive central depot. We propose an enumeration-based approximation to find the cost-minimizing policy parameters for the individual retailers and an approximation procedure to solve the combined rationing and transshipment problem. The latter relies on adjusting the demand arrival rates and the unit transshipment costs for both types of customers at all retailers. An extensive numerical study highlights the impact of transshipments on the retailers' rationing policies. Without transshipment opportunities among each other, retailers set their policy parameters so that the resulting service levels are high for both types of customers. Allowing transshipments results in more aggressive rationing policies, and retailers with aggressive rationing policies benefit from the transshipments the most.

show abstract

Multi-class dynamic inventory rationing with stochastic demands and backordering

Cited by 20 publications

References 29 publications

Inventory rationing policy and backup supply with two classes of customers

Inventory rationing policy and backup supply with two classes of customers

Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Transshipment policies for systems with multiple retailers and two demand classes

Contact Info

Product

Resources

About