Controlling distribution inventory systems with shipment consolidation and compound Poisson demand |
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| Institution: | 1. Faculty of Engineering LTH, Department of Industrial Management and Logistics, Lund University, P.O. Box 118, Lund SE-221 00, Sweden;2. Area Operations Management, University of Mannheim, Business School, P.O. Box 103462, Mannheim D-68131, Germany;3. Faculty of Economics and Management, Chair of Operations Management, Otto-von-Guericke-University Magdeburg, P.O. Box 4120, Magdeburg D-39106, Germany;1. School of Business, Stevens Institute of Technology, 1 Castle Point Terrace, Hoboken, NJ 07030, USA;2. Lally School of Management, Rensselaer Polytechnic Institute, 110 8th Street, Pittsburgh Building, Troy, NY 12180, USA;3. Division of Economic and Risk Analysis, US Securities and Exchange Commission, 100 F St NE, Washington DC 20549, USA;4. Department of Electrical, Computer & Systems Engineering, Rensselaer Polytechnic Institute, Jonsson Engineering Center 6048, Troy, NY 12180, USA;1. Leiden University Mathematical Institute, Niels Bohrweg 1, 2333 CA, Leiden, NL, UK;2. Department of Management Science, Center for Transportation and Logistics, Lancaster University Management School, Bailrigg, Lancaster LA1 4YX, UK;1. Universidade Federal de Minas Gerais, Departamento de Ciência da Computação, Belo Horizonte, Brazil;2. Universidade Federal de Lavras, Departamento de Ciência da Computação, Lavras, Brazil;1. Department of Finance, National Central University, Taiwan;2. Department of Finance, National Taiwan University, Taiwan;3. Department of International Business, National Taiwan University, Taiwan;4. Chinese Academy of Mathematics and Systems Science, China;1. School of Business, Pusan National University, Busan, Republic of Korea;2. Department of Information and Communication Engineering, DGIST, Daegu, Republic of Korea;1. Chair of Logistics and Quantitative Methods, Julius-Maximilians-Universität Würzburg, Sanderring 2, Würzburg 97070, Germany;2. MIT-Zaragoza International Logistics Program, Zaragoza Logistics Center, Edificio Náyade 5, C/ Bari 55 (PLAZA), Zaragoza 50197, Spain |
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| Abstract: | We consider a one-warehouse-multiple-retailer inventory system where the retailers face stochastic customer demand, modelled as compound Poisson processes. Deliveries from the central warehouse to groups of retailers are consolidated using a time based shipment consolidation policy. This means that replenishment orders have to wait until a vehicle departures, which increases the lead time for the retailers and therefore also the safety stock. Thus, a trade-off exists between expected shipment costs and holding costs. Our aim is to determine the shipment intervals and the required amount of safety stock for each retailer and the warehouse to minimize total cost, both for backorder costs and fill rate constraints. Previous work has focused on exact solutions which are computationally demanding and not applicable for larger real world problems. The focus of our present work is on the development of computationally attractive heuristics that can be applied in practice. A numerical study shows that the proposed heuristics perform well compared to the exact cost minimizing solutions. We also illustrate that the approaches are appropriate for solving real world problems using data from a large European company. |
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