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One-Warehouse Multiretailer Systems with Centralized Stock Information

Author

Listed:
  • Fangruo Chen

    (Columbia University, New York, New York)

  • Yu-Sheng Zheng

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania)

Abstract

We consider a distribution system with a central warehouse and multiple retailers. The warehouse orders from an outside supplier and replenishes the retailers which in turn satisfy customer demand. The retailers are nonidentical, and their demand processes are independent compound Poisson. There are economies of scale in inventory replenishment, which is controlled by an echelon-stock, batch-transfer policy. For the special case with simple Poisson demand, we develop an exact method for computing the long-run average holding and backorder costs of the system. Based on this exact method, we provide approximations for compound Poisson demand. Numerical examples are used to illustrate the accuracy of the approximations. We also present a numerical comparison between the average costs of a heuristic, echelon-stock policy and an existing lower bound on the average costs of all feasible policies.

Suggested Citation

  • Fangruo Chen & Yu-Sheng Zheng, 1997. "One-Warehouse Multiretailer Systems with Centralized Stock Information," Operations Research, INFORMS, vol. 45(2), pages 275-287, April.
    • Handle: RePEc:inm:oropre:v:45:y:1997:i:2:p:275-287
    DOI: 10.1287/opre.45.2.275
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    Cited by:

    1. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    2. Geng, Wei & Qiu, Minmin & Zhao, Xiaobo, 2010. "An inventory system with single distributor and multiple retailers: Operating scenarios and performance comparison," International Journal of Production Economics, Elsevier, vol. 128(1), pages 434-444, November.
    3. Lee, Dong Joo & Jeong, In-Jae, 2010. "A distributed coordination for a single warehouse-multiple retailer problem under private information," International Journal of Production Economics, Elsevier, vol. 125(1), pages 190-199, May.
    4. Ki Ling Cheung & Warren H. Hausman, 2000. "An Exact Performance Evaluation for the Supplier in a Two-Echelon Inventory System," Operations Research, INFORMS, vol. 48(4), pages 646-653, August.
    5. Kevin H. Shang & Zhijie Tao & Sean X. Zhou, 2015. "Optimizing Reorder Intervals for Two-Echelon Distribution Systems with Stochastic Demand," Operations Research, INFORMS, vol. 63(2), pages 458-475, April.
    6. van der Heijden, Matthieu, 2000. "Near cost-optimal inventory control policies for divergent networks under fill rate constraints," International Journal of Production Economics, Elsevier, vol. 63(2), pages 161-179, January.
    7. Axsater, Sven & Zhang, Wen-Fa, 1999. "A joint replenishment policy for multi-echelon inventory control," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 243-250, March.
    8. Ng, C. T. & Li, Leon Y. O. & Chakhlevitch, K., 2001. "Coordinated replenishments with alternative supply sources in two-level supply chains," International Journal of Production Economics, Elsevier, vol. 73(3), pages 227-240, October.
    9. Darmawan, Agus & Wong, Hartanto & Thorstenson, Anders, 2021. "Supply chain network design with coordinated inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    10. Gérard P. Cachon, 2001. "Exact Evaluation of Batch-Ordering Inventory Policies in Two-Echelon Supply Chains with Periodic Review," Operations Research, INFORMS, vol. 49(1), pages 79-98, February.
    11. Olof Stenius & Ayşe Gönül Karaarslan & Johan Marklund & A. G. de Kok, 2016. "Exact Analysis of Divergent Inventory Systems with Time-Based Shipment Consolidation and Compound Poisson Demand," Operations Research, INFORMS, vol. 64(4), pages 906-921, August.
    12. Sven Axsäter & Johan Marklund, 2008. "Optimal Position-Based Warehouse Ordering in Divergent Two-Echelon Inventory Systems," Operations Research, INFORMS, vol. 56(4), pages 976-991, August.
    13. Wang, Qinan, 2013. "A periodic-review inventory control policy for a two-level supply chain with multiple retailers and stochastic demand," European Journal of Operational Research, Elsevier, vol. 230(1), pages 53-62.
    14. Fangruo Chen & Rungson Samroengraja, 2000. "A Staggered Ordering Policy for One-Warehouse, Multiretailer Systems," Operations Research, INFORMS, vol. 48(2), pages 281-293, April.
    15. Fangruo Chen, 2000. "Optimal Policies for Multi-Echelon Inventory Problems with Batch Ordering," Operations Research, INFORMS, vol. 48(3), pages 376-389, June.
    16. Boray Huang & Seyed M. R. Iravani, 2005. "Production Control Policies in Supply Chains with Selective-Information Sharing," Operations Research, INFORMS, vol. 53(4), pages 662-674, August.
    17. ElHafsi, Mohsen & Camus, Herve & Craye, Etienne, 2010. "Managing an integrated production inventory system with information on the production and demand status and multiple non-unitary demand classes," European Journal of Operational Research, Elsevier, vol. 207(2), pages 986-1001, December.
    18. Sven Axsäter, 2000. "Exact Analysis of Continuous Review ( R,Q ) Policies in Two-Echelon Inventory Systems with Compound Poisson Demand," Operations Research, INFORMS, vol. 48(5), pages 686-696, October.
    19. Fangruo Chen & Rungson Samroengraja, 2004. "Order Volatility and Supply Chain Costs," Operations Research, INFORMS, vol. 52(5), pages 707-722, October.
    20. Guo, Cong & Li, Xueping, 2014. "A multi-echelon inventory system with supplier selection and order allocation under stochastic demand," International Journal of Production Economics, Elsevier, vol. 151(C), pages 37-47.
    21. Leon Yang Chu & Zuo-Jun Max Shen, 2010. "A Power-of-Two Ordering Policy for One-Warehouse Multiretailer Systems with Stochastic Demand," Operations Research, INFORMS, vol. 58(2), pages 492-502, April.
    22. Wang, Qinan & Wan, Guangyu, 2023. "Fixed-interval order-up-to policies and myopic optimal warehouse stock allocation for one-warehouse multiple-retailer systems," European Journal of Operational Research, Elsevier, vol. 309(3), pages 1112-1124.
    23. Berling, Peter & Johansson, Lina & Marklund, Johan, 2023. "Controlling inventories in omni/multi-channel distribution systems with variable customer order-sizes," Omega, Elsevier, vol. 114(C).
    24. Andersson, Jonas & Malmberg, Filip & Marklund, Johan, 2023. "Exact analysis of One-Warehouse-Multiple-Retailer inventory systems with quantity restricted deliveries," European Journal of Operational Research, Elsevier, vol. 309(3), pages 1161-1172.

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