IDEAS home Printed from https://ideas.repec.org/a/eee/oprepe/v5y2018icp13-21.html
   My bibliography  Save this article

An efficient method for solving a correlated multi-item inventory system

Author

Listed:
  • Lee, Chang-Yong
  • Lee, Dongju

Abstract

We propose an efficient method of finding an optimal solution for a multi-item continuous review inventory model in which a bivariate Gaussian probability distribution represents a correlation between the demands of different items. By utilizing appropriate normalizations of the demands, we show that the normalized demands are uncorrelated. Furthermore, the set of equations coupled with different items can be decoupled in such a way that the order quantity and reorder point for each item can be evaluated independently from those of the other. As a result, in contrast to conventional methods, the solution procedure for the proposed method can be much simpler and more accurate without any approximation. To demonstrate the advantage of the proposed method, we present a solution scheme for a multi-item continuous review inventory model in which the demand of optional components depend on that of a “vanilla box,” representing the customer’s stochastic demand, under stochastic payment and budget constraints. We also perform a sensitivity analysis to investigate the dependence of order quantities and reorder points on the correlation coefficient.

Suggested Citation

  • Lee, Chang-Yong & Lee, Dongju, 2018. "An efficient method for solving a correlated multi-item inventory system," Operations Research Perspectives, Elsevier, vol. 5(C), pages 13-21.
  • Handle: RePEc:eee:oprepe:v:5:y:2018:i:c:p:13-21
    DOI: 10.1016/j.orp.2017.11.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2214716017300532
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.orp.2017.11.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ernst, Ricardo & Kamrad, Bardia, 2000. "Evaluation of supply chain structures through modularization and postponement," European Journal of Operational Research, Elsevier, vol. 124(3), pages 495-510, August.
    2. Wang, Tai-Yue & Hu, Jui-Ming, 2008. "An inventory control system for products with optional components under service level and budget constraints," European Journal of Operational Research, Elsevier, vol. 189(1), pages 41-58, August.
    3. Ghalebsaz-Jeddi, Babak & Shultes, Bruce C. & Haji, Rasoul, 2004. "A multi-product continuous review inventory system with stochastic demand, backorders, and a budget constraint," European Journal of Operational Research, Elsevier, vol. 158(2), pages 456-469, October.
    4. Saghiri, Soroosh S. & Barnes, Stuart J., 2016. "Supplier flexibility and postponement implementation: An empirical analysis," International Journal of Production Economics, Elsevier, vol. 173(C), pages 170-183.
    5. Jayashankar M. Swaminathan & Sridhar R. Tayur, 1998. "Managing Broader Product Lines through Delayed Differentiation Using Vanilla Boxes," Management Science, INFORMS, vol. 44(12-Part-2), pages 161-172, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shi, Ye & Yu, Yugang & Dong, Yuxuan, 2021. "Warehousing platform’s revenue management: A dynamic model of coordinating space allocation for self-use and rent," European Journal of Operational Research, Elsevier, vol. 293(1), pages 167-176.
    2. Nielsen, Izabela Ewa & Saha, Subrata, 2018. "Procurement planning in a multi-period supply chain: An epiphany," Operations Research Perspectives, Elsevier, vol. 5(C), pages 383-398.
    3. Díaz, Ronald David Suárez & Paternina-Arboleda, Carlos D. & Martínez-Flores, José Luis & Jimenez-Barros, Miguel A., 2020. "Economic order quantity for perishables with decreasing willingness to purchase during their life cycle," Operations Research Perspectives, Elsevier, vol. 7(C).
    4. Sebatjane, Makoena & Adetunji, Olufemi, 2019. "Economic order quantity model for growing items with imperfect quality," Operations Research Perspectives, Elsevier, vol. 6(C).
    5. Chiang, Nai-Yuan & Lin, Yiqing & Long, Quan, 2020. "Efficient propagation of uncertainties in manufacturing supply chains: Time buckets, L-leap, and multilevel Monte Carlo methods," Operations Research Perspectives, Elsevier, vol. 7(C).
    6. Zhang, Ren-Qian & Yi, Meng & Wang, Qi-Qi & Xiang, Chen, 2018. "Polynomial algorithm of inventory model with complete backordering and correlated demand caused by cross-selling," International Journal of Production Economics, Elsevier, vol. 199(C), pages 193-198.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Tai-Yue & Hu, Jui-Ming, 2008. "An inventory control system for products with optional components under service level and budget constraints," European Journal of Operational Research, Elsevier, vol. 189(1), pages 41-58, August.
    2. Wu, Jun & Du, Gang & Jiao, Roger J., 2021. "Optimal postponement contracting decisions in crowdsourced manufacturing: A three-level game-theoretic model for product family architecting considering subcontracting," European Journal of Operational Research, Elsevier, vol. 291(2), pages 722-737.
    3. Graman, Gregory A., 2010. "A partial-postponement decision cost model," European Journal of Operational Research, Elsevier, vol. 201(1), pages 34-44, February.
    4. Tibben-Lembke, Ronald S. & Bassok, Yehuda, 2005. "An inventory model for delayed customization: A hybrid approach," European Journal of Operational Research, Elsevier, vol. 165(3), pages 748-764, September.
    5. Tang, Dong, 2011. "Managing finished-goods inventory under capacitated delayed differentiation," Omega, Elsevier, vol. 39(5), pages 481-492, October.
    6. Weskamp, Christoph & Koberstein, Achim & Schwartz, Frank & Suhl, Leena & Voß, Stefan, 2019. "A two-stage stochastic programming approach for identifying optimal postponement strategies in supply chains with uncertain demand," Omega, Elsevier, vol. 83(C), pages 123-138.
    7. S Kumar & D A Nottestad & E E Murphy, 2009. "Effects of product postponement on the distribution network: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(4), pages 471-480, April.
    8. Işık Biçer & Florian Lücker & Tamer Boyacı, 2022. "Beyond Retail Stores: Managing Product Proliferation along the Supply Chain," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1135-1156, March.
    9. Fay, Scott & Mitra, Deb & Wang, Qiong, 2009. "Ask or infer? Strategic implications of alternative learning approaches in customization," International Journal of Research in Marketing, Elsevier, vol. 26(2), pages 136-152.
    10. Kamath, Narasimha B. & Roy, Rahul, 2007. "Capacity augmentation of a supply chain for a short lifecycle product: A system dynamics framework," European Journal of Operational Research, Elsevier, vol. 179(2), pages 334-351, June.
    11. Cochran, Jeffery K. & Ramanujam, Balaji, 2006. "Carrier-mode logistics optimization of inbound supply chains for electronics manufacturing," International Journal of Production Economics, Elsevier, vol. 103(2), pages 826-840, October.
    12. Alawneh, Fawzat & Zhang, Guoqing, 2018. "Dual-channel warehouse and inventory management with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 84-106.
    13. Choi, Tsan-Ming & Chen, Yue & Chung, Sai Ho, 2019. "Online-offline fashion franchising supply chains without channel conflicts: Choices on postponement and contracts," International Journal of Production Economics, Elsevier, vol. 215(C), pages 174-184.
    14. Willem van Jaarsveld & Alan Scheller-Wolf, 2015. "Optimization of Industrial-Scale Assemble-to-Order Systems," INFORMS Journal on Computing, INFORMS, vol. 27(3), pages 544-560, August.
    15. Kai-Lung Hui, 2004. "Product Variety Under Brand Influence: An Empirical Investigation of Personal Computer Demand," Management Science, INFORMS, vol. 50(5), pages 686-700, May.
    16. Wei, Liqun & Zhang, Jianxiong, 2021. "Strategic substitutes or complements? The relationship between capacity sharing and postponement flexibility," European Journal of Operational Research, Elsevier, vol. 294(1), pages 138-148.
    17. Sandrin, Enrico & Trentin, Alessio & Forza, Cipriano, 2018. "Leveraging high-involvement practices to develop mass customization capability: A contingent configurational perspective," International Journal of Production Economics, Elsevier, vol. 196(C), pages 335-345.
    18. Xiao, Yongbo & Chen, Jian & Lee, Chung-Yee, 2010. "Optimal decisions for assemble-to-order systems with uncertain assembly capacity," International Journal of Production Economics, Elsevier, vol. 123(1), pages 155-165, January.
    19. Song, Zhe & Kusiak, Andrew, 2010. "Mining Pareto-optimal modules for delayed product differentiation," European Journal of Operational Research, Elsevier, vol. 201(1), pages 123-128, February.
    20. Gooris, Julien & Peeters, Carine, 2014. "Home–Host Country Distance in Offshore Governance Choices," Journal of International Management, Elsevier, vol. 20(1), pages 73-86.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:oprepe:v:5:y:2018:i:c:p:13-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/operations-research-perspectives .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.