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A Partial Backordering Inventory Model with a Drop-Shipping Option Under Purchase Dependence

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  • Changkyu Park

    (College of Business, University of Ulsan, Ulsan 680-749, Republic of Korea)

Abstract

Drop-shipping is a commonly adopted online-order fulfillment strategy in the Internet age. In this practice, online retailers leverage the fulfillment capabilities of suppliers to fulfill orders. On the other hand, purchase dependence is a frequent phenomenon and is characterized by the purchase of certain items together due to their unknown interior associations. Although this concept has been significantly examined in the marketing field (e.g., market basket analysis), it has largely remained unaddressed in operations management. This paper develops an (R,T) model to address an environment in which unmet demand orders are partially lost and partially backordered when purchase dependence exists. The partial backorders are fulfilled by a drop-shipping option. Through computational analyses, this paper demonstrates the effect of both drop-shipping on a partial backordering and purchase dependence. The results show that more profit can be realized by utilizing a drop-shipping option under purchase dependence.

Suggested Citation

  • Changkyu Park, 2017. "A Partial Backordering Inventory Model with a Drop-Shipping Option Under Purchase Dependence," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(04), pages 1-20, August.
    • Handle: RePEc:wsi:apjorx:v:34:y:2017:i:04:n:s0217595917500166
    DOI: 10.1142/S0217595917500166
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    References listed on IDEAS

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    Cited by:

    1. Barcs, Cristian & Pop, Izabela Luiza & Toader, Cezar & Ighian, Diana, 2022. "Drop-Shipping – A Business Model Without Holding Inventory: A Case Study of Online Store," MPRA Paper 118638, University Library of Munich, Germany.

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