Distribution policy in an M-store regional supply chain

Chumpol Monthatipkul, Sanchoy Das and Pisal Yenradee

International Journal of Integrated Supply Management, 2010, vol. 5, issue 3, 214-238

Abstract: The Regional Supply Chain Replenishment problem consists of one warehouse distributing one product to M-stores. Here, we assume the store demand is independent and normally distributed. There is one truck at the warehouse, which makes one replenishment trip to one store per period. Based on the store inventory level, the warehouse makes two decisions in each period: which store to replenish and the replenishment quantity. The objective is to position regional inventory to minimise lost sales. Two heuristic solutions are presented. The BL-Heuristic is easily implemented but performs well when demand variance is low. The AD-Heuristic uses an LP model to prescribe a replenishment plan. The key factor in the AD-Heuristic is the demand buffer factor K, and a simulation method for deriving K is proposed. The efficiency of the AD-Heuristic was tested, and its performance stays consistently within 5% of the adjusted lower bound.

Keywords: safety stock allocation; inventory rationing; regional inventories; distribution policies; M-stores; warehouses; stock replenishment; decision making; sales; loss minimisation; BL-heuristic; AD-heuristic; demand variance; LP models; demand buffers; simulation methods; adjusted lower bounds; integrated SCM; supply chain management. (search for similar items in EconPapers)
Date: 2010
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