A Two-Echelon Inventory System with a Minimum Order Quantity Requirement
In this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particula...
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doaj-0230f3fd79ca4cd5901dc6f8754fc27f2020-11-25T01:30:59ZengMDPI AGSustainability2071-10502019-09-011118505910.3390/su11185059su11185059A Two-Echelon Inventory System with a Minimum Order Quantity RequirementHuaxiao Shen0Tian Tian1Han Zhu2Business School, Sun Yat-sen University, Guangzhou 510275, ChinaSchool of Management Science and Engineering, Dongbei University of Finance and Economics, Dalian 116025, ChinaSchool of Management Science and Engineering, Dongbei University of Finance and Economics, Dalian 116025, ChinaIn this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particularly, as stipulated by the supplier, there is a minimum order quantity (MOQ) requirement for the warehouse. That is, the warehouse must order either none or at least as much as the MOQ. To investigate this system analytically, we assume retailers adopt the base-stock policy, and we design for the warehouse a new heuristic ordering policy, called refined base-stock policy, which conforms to the MOQ requirement. Moreover, in the case of shortages, we assume the warehouse adopts a virtual allocation policy, and therefore the orders for individual units are filled in the same order as the original demands at the retailers. To evaluate the long-run average system cost exactly, we present a position-based cost-accounting scheme, in which the cost associated with each unit is assigned to its first position at the warehouse. We also derive lower and upper bounds of the inventory parameters, facilitating the search for the optimal policy that minimizes the long-run average system cost.https://www.mdpi.com/2071-1050/11/18/5059inventory managementtwo-echelon inventory systemwarehouseminimum order quantityanalytical modelcost optimization |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Huaxiao Shen Tian Tian Han Zhu |
spellingShingle |
Huaxiao Shen Tian Tian Han Zhu A Two-Echelon Inventory System with a Minimum Order Quantity Requirement Sustainability inventory management two-echelon inventory system warehouse minimum order quantity analytical model cost optimization |
author_facet |
Huaxiao Shen Tian Tian Han Zhu |
author_sort |
Huaxiao Shen |
title |
A Two-Echelon Inventory System with a Minimum Order Quantity Requirement |
title_short |
A Two-Echelon Inventory System with a Minimum Order Quantity Requirement |
title_full |
A Two-Echelon Inventory System with a Minimum Order Quantity Requirement |
title_fullStr |
A Two-Echelon Inventory System with a Minimum Order Quantity Requirement |
title_full_unstemmed |
A Two-Echelon Inventory System with a Minimum Order Quantity Requirement |
title_sort |
two-echelon inventory system with a minimum order quantity requirement |
publisher |
MDPI AG |
series |
Sustainability |
issn |
2071-1050 |
publishDate |
2019-09-01 |
description |
In this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particularly, as stipulated by the supplier, there is a minimum order quantity (MOQ) requirement for the warehouse. That is, the warehouse must order either none or at least as much as the MOQ. To investigate this system analytically, we assume retailers adopt the base-stock policy, and we design for the warehouse a new heuristic ordering policy, called refined base-stock policy, which conforms to the MOQ requirement. Moreover, in the case of shortages, we assume the warehouse adopts a virtual allocation policy, and therefore the orders for individual units are filled in the same order as the original demands at the retailers. To evaluate the long-run average system cost exactly, we present a position-based cost-accounting scheme, in which the cost associated with each unit is assigned to its first position at the warehouse. We also derive lower and upper bounds of the inventory parameters, facilitating the search for the optimal policy that minimizes the long-run average system cost. |
topic |
inventory management two-echelon inventory system warehouse minimum order quantity analytical model cost optimization |
url |
https://www.mdpi.com/2071-1050/11/18/5059 |
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