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Effectiveness of (R, Q) policies in one‐warehouse multiretailer systems with deterministic demand and backlogging

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  • Fangruo Chen

Abstract

Consider a distribution system with a central warehouse and multiple retailers. Customer demand arrives at each of the retailers continuously at a constant rate. The retailers replenish their inventories from the warehouse which in turn orders from an outside supplier with unlimited stock. There are economies of scale in replenishing the inventories at both the warehouse and the retail level. Stockouts at the retailers are backlogged. The system incurs holding and backorder costs. The objective is to minimize the long‐run average total cost in the system. This paper studies the cost effectiveness of (R, Q) policies in the above system. Under an (R, Q) policy, each facility orders a fixed quantity Q from its supplier every time its inventory position reaches a reorder point R. It is shown that (R, Q) policies are at least 76% effective. Numerical examples are provided to further illustrate the cost effectiveness of (R, Q) policies. © 2000 John Wiley & Sons, Inc. Naval Research Logistics 47: 422–439, 2000

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  • Fangruo Chen, 2000. "Effectiveness of (R, Q) policies in one‐warehouse multiretailer systems with deterministic demand and backlogging," Naval Research Logistics (NRL), John Wiley & Sons, vol. 47(5), pages 422-439, August.
    • Handle: RePEc:wly:navres:v:47:y:2000:i:5:p:422-439
    DOI: 10.1002/1520-6750(200008)47:53.0.CO;2-V
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    1. Fangruo Chen, 1998. "Stationary Policies in Multiechelon Inventory Systems with Deterministic Demand and Backlogging," Operations Research, INFORMS, vol. 46(3-supplem), pages 26-34, June.
    2. A. Federgruen & M. Queyranne & Yu-Sheng Zheng, 1992. "Simple Power-of-Two Policies are Close to Optimal in a General Class of Production/Distribution Networks with General Joint Setup Costs," Mathematics of Operations Research, INFORMS, vol. 17(4), pages 951-963, November.
    3. Derek Atkins & Daning Sun, 1995. "98%-Effective Lot Sizing for Series Inventory Systems with Backlogging," Operations Research, INFORMS, vol. 43(2), pages 335-345, April.
    4. William L. Maxwell & John A. Muckstadt, 1985. "Establishing Consistent and Realistic Reorder Intervals in Production-Distribution Systems," Operations Research, INFORMS, vol. 33(6), pages 1316-1341, December.
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