Managing Supply Chain Demand Variability with Scheduled Ordering Policies

Gérard P. Cachon
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Gérard P. Cachon: Duke University, Fuqua School of Business, Durham, North Carolina 27708

Management Science, 1999, vol. 45, issue 6, 843-856

Abstract: This paper studies supply chain demand variability in a model with one supplier and Nretailers that face stochastic demand. Retailers implement scheduled ordering policies: Orders occur at fixed intervals and are equal to some multiple of a fixed batch size. A method is presented that exactly evaluates costs. Previous research demonstrates that the supplier's demand variance declines as the retailers' order intervals are balanced, i.e., the same number of retailers order each period. This research shows that the supplier's demand variance will (generally) decline as the retailers' order interval is lengthened or as their batch size is increased. Lower supplier demand variance can certainly lead to lower inventory at the supplier. This paper finds that reducing supplier demand variance with scheduled ordering policies can also lower total supply chain costs.

Keywords: supply chain management; multi-echelon inventory; bullwhip effect (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (55)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:45:y:1999:i:6:p:843-856

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