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

Kai Luo, Ramesh Bollapragada*, Laoucine Kerbache

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

The objective of this research is to develop an optimal inventory allocation methodology for a supply chain consisting of a capacitated retailer with limited shelf space, and two unreliable capacitated suppliers in an uncertain environment. We develop conceptual and analytical models that provide allocation preferences between shelf-space and warehouse in both deterministic and stochastic demand cases, and develop managerial insights based on them. For each case, we provide both a closed-form solution and a heuristic method, and illustrate the bounds on the optimal solution. Further, we show that the cost function is L-convex in some cases. Finally, we prove that the expected profit decreases as the variance of demand increases.

Original languageEnglish
Pages (from-to)168-181
Number of pages14
JournalInternational Journal of Production Economics
Volume187
DOIs
Publication statusPublished - 1 May 2017
Externally publishedYes

Keywords

  • Capacity allocation
  • Heuristic methods
  • Inventory management
  • Supply chain management

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