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Inventory allocation and shipping when demand temporarily exceeds production capacity

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  • Jang, Wooseung
  • Kim, Daeki
  • Park, Kwangtae

Abstract

We address the concept of an integrated inventory allocation and shipping model for a manufacturer with limited production capacity and multiple types of retailers with different backorder/waiting and delivery costs. The problem is to decide how to allocate and deliver produced items when the total retailer demand exceeds the production capacity, so that total retailer backorder and delivery costs are minimized. Our analytical model provides optimal allocation and shipping policies from the manufacturer’s viewpoint. We also investigate the allocation strategy of a manufacturer competing with other retailers to directly sell to end consumers.

Suggested Citation

  • Jang, Wooseung & Kim, Daeki & Park, Kwangtae, 2013. "Inventory allocation and shipping when demand temporarily exceeds production capacity," European Journal of Operational Research, Elsevier, vol. 227(3), pages 464-470.
    • Handle: RePEc:eee:ejores:v:227:y:2013:i:3:p:464-470
    DOI: 10.1016/j.ejor.2013.01.013
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    Cited by:

    1. Ge, Jiwen & Honhon, Dorothee & Fransoo, Jan C. & Zhao, Lei, 2020. "Manufacturer competition in the nanostore retail channel," European Journal of Operational Research, Elsevier, vol. 286(1), pages 360-374.
    2. Kim, Nayeon & Montreuil, Benoit & Klibi, Walid, 2022. "Inventory availability commitment under uncertainty in a dropshipping supply chain," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1155-1174.
    3. Becerril-Arreola, Rafael & Leng, Mingming & Parlar, Mahmut, 2013. "Online retailers’ promotional pricing, free-shipping threshold, and inventory decisions: A simulation-based analysis," European Journal of Operational Research, Elsevier, vol. 230(2), pages 272-283.

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