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Inventory sharing in integrated network design and inventory optimization with low-demand parts

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  • Iyoob, Ilyas Mohamed
  • Kutanoglu, Erhan

Abstract

Service Parts Logistics (SPL) problems induce strong interaction between network design and inventory stocking due to high costs and low demands of parts and response time based service requirements. These pressures motivate the inventory sharing practice among stocking facilities. We incorporate inventory sharing effects within a simplified version of the integrated SPL problem, capturing the sharing fill rates in 2-facility inventory sharing pools. The problem decides which facilities in which pools should be stocked and how the demand should be allocated to stocked facilities, given full inventory sharing between the facilities within each pool so as to minimize the total facility, inventory and transportation costs subject to a time-based service level constraint. Our analysis for the single pool problem leads us to model this otherwise non-linear integer optimization problem as a modified version of the binary knapsack problem. Our numerical results show that a greedy heuristic for a network of 100 facilities is on average within 0.12% of the optimal solution. Furthermore, we observe that a greater degree of sharing occurs when a large amount of customer demands are located in the area overlapping the time windows of both facilities in 2-facility pools.

Suggested Citation

  • Iyoob, Ilyas Mohamed & Kutanoglu, Erhan, 2013. "Inventory sharing in integrated network design and inventory optimization with low-demand parts," European Journal of Operational Research, Elsevier, vol. 224(3), pages 497-506.
  • Handle: RePEc:eee:ejores:v:224:y:2013:i:3:p:497-506
    DOI: 10.1016/j.ejor.2012.09.033
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    References listed on IDEAS

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    1. Kutanoglu, Erhan & Mahajan, Mohit, 2009. "An inventory sharing and allocation method for a multi-location service parts logistics network with time-based service levels," European Journal of Operational Research, Elsevier, vol. 194(3), pages 728-742, May.
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    Cited by:

    1. Jeet, Vishv & Kutanoglu, Erhan, 2018. "Part commonality effects on integrated network design and inventory models for low-demand service parts logistics systems," International Journal of Production Economics, Elsevier, vol. 206(C), pages 46-58.
    2. Chun-Hung Chiu & Gang Hao & Xin Dai & Hang Xie, 2020. "Inventory sharing of professional optics product supply chain with equal power agents," Annals of Operations Research, Springer, vol. 291(1), pages 169-194, August.
    3. Schleich, Benjamin Rafael & Seok, Hyesung & Yoon, Sang Won, 2017. "Performance assessment in homogeneous/heterogeneous collaborative enterprise networks with inventory adjustment," European Journal of Operational Research, Elsevier, vol. 261(3), pages 958-970.

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