Optimal Pooling of Inventories with Substitution: A Literature Review
Y. Deflem and
I. Van Nieuwenhuyse
Review of Business and Economic Literature, 2011, vol. 56, issue 3, 345-375
In many inventory management systems, some kind of substitution flexibility exists, meaning that a substitute or more flexible item can be used (at an additional cost) when the preferred product stocks out. Through the use of substitution flexibility, we can take advantage of the risk pooling effect on the flexible item. Since risk pooling reduces total inventory holding costs, a trade-off between inventory holding costs and flexibility costs will determine the optimal inventory control parameters for the different items. In this research paper, we focus on different types of inventory management systems with substitution flexibility, and discuss three methods suggested in the literature (i.e., newsvendor models, Monte Carlo simulation and continuoustime Markov chains) in order to optimally exploit substitution flexibility.
References: Add references at CitEc
Citations Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sen:rebelj:v:56:i:3:y:2011:p:345-375
Access Statistics for this article
Review of Business and Economic Literature is currently edited by Hans Kluwer
More articles in Review of Business and Economic Literature from Intersentia
Series data maintained by Petra Van den Bempt ().