Analysis of the Optimal Threshold Policy of the E-Tailer with Mixture Strategy in E-Fulfillment

This study considers a supply chain consisting of a supplier and an e-tailer on the internet. The e-tailer replenishes products from the supplier for private inventory and sends drop shipping requests to him for delivering orders to customers when private inventory is insufficient or stock out, whereas the supplier provides drop shipping service with a limited ability for the e-tailer. This paper proposes an algorithm to simulate the scheduling sequences of the e-tailer with the optimal threshold policy and mixture strategy in every scheduling unit and obtains the optimal threshold of private inventory for the e-tailer to achieve average profit maximization. The impacts of mixture of demand and lead time uncertainty are examined. The influence of high priority demand variability on the optimal threshold policy in two complex scenarios are also considered in this study. These results have an important guiding significance for the e-tailer who adopts the mixture strategy in e-fulfillment under complex operating environments.