A single-period inventory placement problem for a supply chain with the expected profit objective |
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Authors: | Chia-Shin Chung James Flynn Piotr Stalinski |
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Institution: | 1. Department of Operations Management and Business Statistics, Cleveland State University, Cleveland, OH 44115, United States;2. Department of Management and Business Communications, Central Missouri State University Warrensburg, MO 64093, United States |
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Abstract: | Consider the expected profit maximizing inventory placement problem in an N-stage, supply chain facing a stochastic demand for a single planning period for a specialty item with a very short selling season. Each stage is a stocking point holding some form of inventory (e.g., raw materials, subassemblies, product returns or finished products) that after a suitable transformation can satisfy customer demand. Stocking decisions are made before demand occurs. Because of delays, only a known fraction of demand at a stage will wait for shipments. Unsatisfied demand is lost. The revenue, salvage value, ordering, shipping, processing, and lost sales costs are proportional. There are fixed costs for utilizing stages for stock storage. After characterizing an optimal solution, we propose an algorithm for its computation. For the zero fixed cost case, the computations can be done on a spreadsheet given normal demands. For the nonnegative fixed cost case, we develop an effective branch and bound algorithm. |
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Keywords: | Inventory Stochastic Newsboy Single-period Supply chain |
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