Articles

Inventory allocation models for a two-stage, twoproduct, capacitated supplier and retailer problem with random demand

K. LUO, R. BOLLAPRAGADA, L. KERBACHE

International Journal of Production Economics

May 2017, vol. 187, pp.168-181

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: supply chain management, inventory management, capacity allocation, heuristic methods

https://www.sciencedirect.com/science/article/pii/S0925527316303930


The objective of this research is to develop an optimal inventory allocation methodologyfor a supply chain consisting of a capacitated retailer with limited shelf space, andtwo unreliable capacitated suppliers in an uncertain environment. We develop conceptualand analytical models that provide allocation preferences between shelf-space andwarehouse in both deterministic and stochastic demand cases, and develop managerialinsights based on them. For each case, we provide both a closed-form solution and aheuristic method, and illustrate the bounds on the optimal solution. Further, we showthat the cost function is L-convex in some cases. Finally, we prove that the expectedprofit decreases as the variance of demand increases.


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