Multi-Item, One-Warehouse, Multi-Retailer Distribution Systems

John A. Muckstadt and Robin O. Roundy
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John A. Muckstadt: School of Operations Research and Industrial Engineering, Cornell University, Ithaca, New York 14853
Robin O. Roundy: School of Operations Research and Industrial Engineering, Cornell University, Ithaca, New York 14853

Management Science, 1987, vol. 33, issue 12, 1613-1621

Abstract: In this paper we study the problem of coordinating the purchase and shipment of I items in a one-warehouse, N-retailer inventory system. The model includes positive echelon holding costs, fixed costs for ordering and shipping each item, and a fixed joint item order cost at each retailer. Demand for each item at each retailer is assumed to occur at a constant and continuous rate. A mathematical model is developed based on these assumptions and the assumption that a stationary nested policy is followed. An efficient algorithm is presented based on the problem's structure that involves only sorting and runs in O(NI log NI) time. The cost of the policy computed is proven to be within 6% of the cost of an optimal nested policy. An example is presented to illustrate the problem structure and the proposed algorithm.

Keywords: inventory; deterministic models; multi-echelon (search for similar items in EconPapers)
Date: 1987
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:33:y:1987:i:12:p:1613-1621

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