An Exact Performance Evaluation for the Supplier in a Two-Echelon Inventory System
Ki Ling Cheung () and
Warren H. Hausman ()
Additional contact information
Ki Ling Cheung: Department of Information and Systems Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Warren H. Hausman: Department of Management Science and Engineering, Stanford University, Stanford, California 94305
Operations Research, 2000, vol. 48, issue 4, 646-653
Abstract:
This paper studies a continuous review two-echelon inventory system with a supplier serving multiple retailers. Each location uses a decentralized ( Q, R ) policy based on installation stocks. Each retailer may set a unique reorder quantity as a multiple of a basic packaging size Q . The supplier, in turn, adopts a similar batch replenishment policy. Our objective is to derive the exact steady-state performance for the supplier. We show that the inventory position at the supplier can be easily characterized by a uniform distribution. As a result, the closed-form expected cost function is tractable. We also examine the performance of approximation schemes such as the classic Poisson approximation. Our numerical results show that even though the Poisson approximation performs reasonably well in estimating steady-state performance, the cost penalty for using it in optimization may be significant.
Keywords: Inventory/production: operating characteristics: supplier performance evaluation: multi-echelon: two echelons: uncertainty; stochastic: random demand (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
http://dx.doi.org/10.1287/opre.48.4.646.12421 (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:48:y:2000:i:4:p:646-653
Access Statistics for this article
More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().