Coordinated Multi-Stage Inventory Systems with Stochastic Demand

University dissertation from Jonas Andersson, Division of Production Management, Lund University

Abstract: This thesis is based on six scientific papers providing different methods for coordinated inventory control in supply chains. The main focus is on supply chains in connection with distribution of products to customers. Two different problem areas are considered. One problem area concerns coordination by centralized optimization of local decision rules. It is assumed that the decision system is centralized, in the sense that the policies at the different sites can be evaluated and optimized centrally. A two-level distribution system with one central warehouse and a number of retailers is considered. The retailers face stochastic customer demand and the warehouse faces the orders from the retailers, as they replenish their stocks. The warehouse, in turn, replenishes its stock from an outside supplier. All facilities apply ordering policies that only use information about the local inventory position. This problem setting is dealt with in three papers, which specifically consider evaluation of general performance measures for different (R,Q) policies, evaluation of policies where the deliveries from the warehouse to the retailers are performed in fixed delivery batches and evaluation and optimization of (S-1,S) policies when customer demands are lost in case of stockouts at the retailers. The other main problem area considered is coordination of independent decision-makers that optimize local decision rules. In this case the decision system is decen-tralized, in the sense that each facility is assumed to minimize its local costs, without taking the rest of the system into consideration. We evaluate the performance of the inventory system when different kinds of penalties, transfer prices and cost sharing schemes are used to coordinate the facilities. Two different settings are considered: - A two-level inventory system with one warehouse and a number of retailers. The problem is to coordinate the decision making at the warehouse and the retailers, such that the distribution of stocks between the warehouse and the retailers is reasonable. - A retailer network where the retailers can cooperate by emergency lateral trans-shipments. The problem is to coordinate the decision-making at the retailers in order to obtain effective cooperation.

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