A multiple replenishment contract with ARIMA demand processes

Jong Soo Kim (), K Y Shin and S E Ahn
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Jong Soo Kim: Hanyang University, Ansan Campus
K Y Shin: Hanyang University, Ansan Campus
S E Ahn: Hanyang University, Ansan Campus

Journal of the Operational Research Society, 2003, vol. 54, issue 11, 1189-1197

Abstract: Abstract This paper is concerned with a multiple replenishment contract with a purchase price discount in a supply chain. The chain is composed of one supplier, one buyer and consumers for a product. The replenishment contract is based upon the well-known (s, Q) policy, but allows us to contract replenishments at a future time with a price discount. Owing to the larger forecast error of future demand, the buyer should keep a higher level of safety stock to provide the same level of service as the usual (s, Q) policy. However, the buyer can reduce his purchase cost by ordering a larger quantity at a discounted price. Hence, there exists a trade-off between the price discount and the inventory holding cost. For the ARIMA demand processes, we present a model for the contract and an algorithm to find the number of the future replenishments. Computational experiments show that the algorithm finds the global optimum solution very quickly.

Keywords: inventory; ARIMA; supply chain; replenishment contract (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/palgrave.jors.2601620

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