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Demand selection decisions for a multi-echelon inventory distribution system

Author

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  • Jia Shu

    (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China)

  • Zhengyi Li

    (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China)

  • Liya Huang

    (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China)

Abstract

In this paper, we study an integrated demand selection and multi-echelon inventory control problem that generalizes the classical deterministic single distribution centre (DC) multi-retailer model by incorporating demand selection decisions. In addition to the ordering and holding cost components, a concave operating cost of the DC and a capacity on the total market demand served are also considered. For given revenue and cost parameters, the problem is to determine which sets of demand to fulfill and which multi-echelon inventory control policy to implement so as to maximize the net profit. We show that the problem can be formulated as a nonlinear discrete optimization model. We analyse the structural properties of the model and, based on these, outline an approach to solve the model efficiently. We also present some interesting managerial insights obtained from the numerical experiments.

Suggested Citation

  • Jia Shu & Zhengyi Li & Liya Huang, 2013. "Demand selection decisions for a multi-echelon inventory distribution system," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(9), pages 1307-1313, September.
    • Handle: RePEc:pal:jorsoc:v:64:y:2013:i:9:p:1307-1313
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