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Inventory management for dual sales channels with inventory-level-dependent demand

Author

Listed:
  • Tingting Li

    (Department of Mathematical Sciences, Tsinghua University, Beijing, China)

  • Xiaobo Zhao

    (Department of Industrial Engineering, Tsinghua University, Beijing, China)

  • Jinxing Xie

    (Department of Mathematical Sciences, Tsinghua University, Beijing, China)

Abstract

This paper studies the inventory management problem of dual channels operated by one vendor. Demands of dual channels are inventory-level-dependent. We propose a multi-period stochastic dynamic programming model which shows that under mild conditions, the myopic inventory policy is optimal for the infinite horizon problem. To investigate the importance of capturing demand dependency on inventory levels, we consider a heuristic where the vendor ignores demand dependency on inventory levels, and compare the optimal inventory levels with those recommended by the heuristic. Through numerical examples, we show that the vendor may order less for dual channels than those recommended by the heuristic, and the difference between the inventory levels in the two cases can be so large that the demand dependency on inventory levels cannot be neglected. In the end, we numerically examine the impact of different ways to treat unmet demand and obtain some managerial insights.

Suggested Citation

  • Tingting Li & Xiaobo Zhao & Jinxing Xie, 2015. "Inventory management for dual sales channels with inventory-level-dependent demand," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(3), pages 488-499, March.
    • Handle: RePEc:pal:jorsoc:v:66:y:2015:i:3:p:488-499
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    Citations

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    Cited by:

    1. Goedhart, Joost & Haijema, René & Akkerman, Renzo, 2023. "Modelling the influence of returns for an omni-channel retailer," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1248-1263.
    2. 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.
    3. Marco Melacini & Elena Tappia, 2018. "A Critical Comparison of Alternative Distribution Configurations in Omni-Channel Retailing in Terms of Cost and Greenhouse Gas Emissions," Sustainability, MDPI, vol. 10(2), pages 1-15, January.
    4. Xiaoyan Xu & Yanan Ji & Yiwen Bian & Yanhong Sun, 2017. "Service outsourcing under co-opetition and information asymmetry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(6), pages 666-677, June.

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