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The continuous resupply policy for deteriorating items with stock-dependent observable demand in a two-warehouse and two-echelon supply chain

The continuous resupply policy for deteriorating items with stock-dependent observable demand in a two-warehouse and two-echelon supply chain
The continuous resupply policy for deteriorating items with stock-dependent observable demand in a two-warehouse and two-echelon supply chain
This paper expands previous work on stock-dependent demand for a retailer with a two-warehouse (OW/RW) situation to the case of deteriorating items and where the retailer seeks to obtain the integrated optimal distribution policy from collaboration with a supplier. Motivated by practical applications and recent literature, a policy is considered whereby products in good order from the retailer’s back-room (RW) are frequently transferred to its capacitated main store OW. Because the demand depends on the stock of good products in the OW, the aim is to keep this stock at its full capacity with products in good condition, and this can be done for as long as the RW stock of good products is positive. A firm’s objective function is the Net Present Value (NPV) of the firm’s future cash-flows. The profit functions are developed for both this continuous resupply policy and the commonly used policy in the OW/RW literature. Numerical examples are included and have been solved with grid search methods. The examples illustrate the benefits of adopting the continuous resupply policy, and also collaboration between the retailer and the wholesaler. Moreover, it is shown how these benefits can be shared by small adjustments to the product’s unit price between the firms.
Capacity constraint, Deteriorating inventory, Net present value, Shortages
0307-904X
271-292
Ghiami, Yousef
7b068b8e-c397-49d0-92ae-78886f1c84ec
Beullens, Patrick
893ad2e2-0617-47d6-910b-3d5f81964a9c
Ghiami, Yousef
7b068b8e-c397-49d0-92ae-78886f1c84ec
Beullens, Patrick
893ad2e2-0617-47d6-910b-3d5f81964a9c

Ghiami, Yousef and Beullens, Patrick (2020) The continuous resupply policy for deteriorating items with stock-dependent observable demand in a two-warehouse and two-echelon supply chain. Applied Mathematical Modelling, 82, 271-292. (doi:10.1016/j.apm.2020.01.046).

Record type: Article

Abstract

This paper expands previous work on stock-dependent demand for a retailer with a two-warehouse (OW/RW) situation to the case of deteriorating items and where the retailer seeks to obtain the integrated optimal distribution policy from collaboration with a supplier. Motivated by practical applications and recent literature, a policy is considered whereby products in good order from the retailer’s back-room (RW) are frequently transferred to its capacitated main store OW. Because the demand depends on the stock of good products in the OW, the aim is to keep this stock at its full capacity with products in good condition, and this can be done for as long as the RW stock of good products is positive. A firm’s objective function is the Net Present Value (NPV) of the firm’s future cash-flows. The profit functions are developed for both this continuous resupply policy and the commonly used policy in the OW/RW literature. Numerical examples are included and have been solved with grid search methods. The examples illustrate the benefits of adopting the continuous resupply policy, and also collaboration between the retailer and the wholesaler. Moreover, it is shown how these benefits can be shared by small adjustments to the product’s unit price between the firms.

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Ghiami Beullens 2020 pre-print - Accepted Manuscript
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More information

Accepted/In Press date: 25 January 2020
e-pub ahead of print date: 27 January 2020
Published date: 1 June 2020
Keywords: Capacity constraint, Deteriorating inventory, Net present value, Shortages

Identifiers

Local EPrints ID: 438018
URI: http://eprints.soton.ac.uk/id/eprint/438018
ISSN: 0307-904X
PURE UUID: 5dc9af0c-3945-44a3-b6da-80d6af07cbb2
ORCID for Patrick Beullens: ORCID iD orcid.org/0000-0001-6156-3550

Catalogue record

Date deposited: 26 Feb 2020 17:31
Last modified: 18 Feb 2021 17:12

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