Abstract
In this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particularly, as stipulated by the supplier, there is a minimum order quantity (MOQ) requirement for the warehouse. That is, the warehouse must order either none or at least as much as the MOQ. To investigate this system analytically, we assume retailers adopt the base-stock policy, and we design for the warehouse a new heuristic ordering policy, called refined base-stock policy, which conforms to the MOQ requirement. Moreover, in the case of shortages, we assume the warehouse adopts a virtual allocation policy, and therefore the orders for individual units are filled in the same order as the original demands at the retailers. To evaluate the long-run average system cost exactly, we present a position-based cost-accounting scheme, in which the cost associated with each unit is assigned to its first position at the warehouse. We also derive lower and upper bounds of the inventory parameters, facilitating the search for the optimal policy that minimizes the long-run average system cost.
Highlights
We study a two-echelon inventory system with one warehouse and multiple retailers (OWMR) in this paper
Retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier
A two-echelon inventory system with a minimum order quantity (MOQ) requirement is analytically studied in this paper, where there are one warehouse and multiple retailers
Summary
We study a two-echelon inventory system with one warehouse and multiple retailers (OWMR) in this paper. If one upstream installation does not have enough inventory, orders from the downstream installation will be delayed, and this delay may result in backlogging cost at the downstream installation Such delay at the upstream installation stands as a substantial challenge for the management of multi-echelon supply chains, and it is the biggest difference from single-echelon inventory systems. The external supplier imposes the MOQ requirement on the warehouse, whereas retailers do not need to consider the MOQ For such a Sustainability 2019, 11, 5059 model, it is not clear how to evaluate the cost and optimize the system, and our efforts are devoted to work them out.
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