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On the value of customer information for an independent supplier in a continuous review inventory system

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  • Axsäter, Sven
  • Viswanathan, S.

Abstract

We consider the inventory control problem of an independent supplier in a continuous review system. The supplier faces demand from a single customer who in turn faces Poisson demand and follows a continuous review (R, Q) policy. If no information about the inventory levels at the customer is available, reviews and ordering are usually carried out by the supplier only at points in time when a customer demand occurs. It is common to apply an installation stock reorder point policy. However, as the demand faced by the supplier is not Markovian, this policy can be improved by allowing placement of orders at any point in time. We develop a time delay policy for the supplier, wherein the supplier waits until time t after occurrence of the customer demand to place his next order. If the next customer demand occurs before this time delay, then the supplier places an order immediately. We develop an algorithm to determine the optimal time delay policy. We then evaluate the value of information about the customer’s inventory level. Our numerical study shows that if the supplier were to use the optimal time delay policy instead of the installation stock policy then the value of the customer’s inventory information is not very significant.

Suggested Citation

  • Axsäter, Sven & Viswanathan, S., 2012. "On the value of customer information for an independent supplier in a continuous review inventory system," European Journal of Operational Research, Elsevier, vol. 221(2), pages 340-347.
    • Handle: RePEc:eee:ejores:v:221:y:2012:i:2:p:340-347
    DOI: 10.1016/j.ejor.2012.03.022
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    References listed on IDEAS

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    Cited by:

    1. Syntetos, A.A. & Teunter, R.H. & Babai, M.Z. & Transchel, S., 2016. "On the benefits of delayed ordering," European Journal of Operational Research, Elsevier, vol. 248(3), pages 963-970.
    2. Ojha, Divesh & Sahin, Funda & Shockley, Jeff & Sridharan, Sri V., 2019. "Is there a performance tradeoff in managing order fulfillment and the bullwhip effect in supply chains? The role of information sharing and information type," International Journal of Production Economics, Elsevier, vol. 208(C), pages 529-543.

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