Dampening variability by using smoothing replenishment rules.

A major cause of supply chain deficiencies is the bullwhip effect which can be substantial even over a single echelon. This effect refers to the tendency of the variance of the replenishment orders to increase as it moves up a supply chain. Supply chain managers experience this variance amplification in both inventory levels and replenishment orders. As a result, companies face shortages or bloated inventories, run-away transportation and warehousing costs and major production adjustment costs. In this article we analyse a major cause of the bullwhip effect and suggest a remedy. We focus on a smoothing replenishment rule that is able to reduce the bullwhip effect across a single echelon. In general, dampening variability in orders may have a negative impact on customer service due to inventory variance increases. We therefore quantify the variance of the net stock and compute the required safety stock as a function of the smoothing required. Our analysis shows that bullwhip can be satisfactorily managed without unduly increasing stock levels to maintain target fill rates.Bullwhip effect; Companies; Cost; Costs; Impact; Inventory; Managers; Order; Replenishment rule; Rules; Safety stock; Supply chain; Supply chain management; Variability; Variance; Variance reduction;

Optimal Order Policy for Deteriorating Items in Response to Temporary Price Discount Linked to Order Quantity

[[abstract]]This paper investigates the possible effects of a temporary price discount offered by a supplier on a retailer's replenishment policy for deteriorating items, whereby the price discount rate depends on the order quantity. The purpose of this study is to develop a decision process for retailers to assist in determining whether to adopt a regular or special order policy. Furthermore, the optimal quantity of a special order policy for a selected case is determined by maximizing the total cost saving between special and regular orders for the duration of the depletion time. This research establishes an algorithm to determine the optimal solution and utilizes several numerical examples to illustrate the theoretical results and subsequently conducts a sensitivity analysis of the optimal solution with respect to the main parameters. Finally, the results reveal that (1) the optimal special order quantity is determined by trading off the benefits of the price discount against the additional holding cost, (2) the retailer benefits in terms of total cost saving if the remnant inventory is as low as possible when adopting a special order policy, (3) for the retailer it is preferable to adopt the special order policy if the unit purchase cost, market demand rate and/or ordering cost increase, and (4) the retailer will order a lower quantity and the total cost saving will decrease when either the holding cost rate or deterioration rate is high. Thus, this study provides the basis for enterprises to make inventory decisions.[[booktype]]紙

A MULTI-ITEM INVENTORY MODEL WITH VARIOUS DEMAND FUNCTIONS CONSIDERING DETERIORATION AND PARTIAL BACKLOGGING

Inventory management is an important thing to be considered in order to run the activities of a company smoothly. By considering deterioration factor, partial backlogging policy and different type of demand functions, we develop a mathematical model for multi-item inventory system. In this paper, three inventory models with constant deterioration, partial backlogging, with various demand functions are developed.  We consider inventory-dependent demand, time-dependent demand and exponential demand function in each model.  In addition, we also consider the replenishment policies for those three items, viz. individual replenishment, joint replenishment and combination both individual and joint replenishments. Sensitivity analysis of the models is also performed, and we found that the ordering cost greatly affects the total inventory cost when comparing the available replenishment policies

Improving promotional effectiveness through supplier-retailer collaboration

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2007.Includes bibliographical references (leaves 60-61).In the consumer products industry, retail chains and manufacturers run promotions to maintain consumer and brand loyalty. The two major issues in planning and executing promotions are to accurately forecast demand and to control Out-of-Stock at the shelf. This thesis addresses both these issues. At the strategic level, "Collaborative, Planning, Forecasting and Replenishment" is used to define a process for two companies to collaboratively plan and execute promotions. At an operational level, the single period multi-item newsboy concept with a budget constraint is used to define an optimization model that helps determine the right budget and order quantities for products under a promotion at a targeted service level to improve profit or sales. The concept of Supply Contracts is researched to identify some ways that can be used to optimize the whole supply chain rather than just the retailer's. The value of optimal collaboration was confirmed in the results shown by the model. When optimizing the entire chain, the maximize profit optimization model achieved combined profit improvements of 37% as compared to an actual promotion.(cont.) When only the retailer profit was maximized, the optimization model resulted in 5.9% profit improvements for the retailer and 0.3% profit improvements for the supplier as compared to an actual promotion. Finally, the revenue maximization model showed that after a certain point, increasing the budget did not result in increased service levels. This research can also be applied to new product launches, seasonality of products as well as daily replenishments.by Gautam Kapur and Bin Liu.M.Eng.in Logistic

Optimal Planning Quantities for Product Transition

The replacement of an existing product with a new one presents many challenges. In particular, uncertainties in a new product introduction often lead to extreme cases of demand and supply mismatches. This paper addresses inventory planning decisions for product upgrades when there is no replenishment opportunity during the transition period. We allow product substitution: when a company runs out of the old product, a customer may be offered the new product as a substitute. We show that the optimal substitution decision is a time-varying threshold policy and establish the optimal planning policy. Further, we determine the optimal delay in a new product introduction, given the initial inventory of the old product

ONE-TIME ORDER INVENTORY MODEL FOR DETERIORATING AND SHORT MARKET LIFE ITEMS WITH TRAPEZOIDAL TYPE DEMAND RATE

Determining the end of the sales period for a one-time order inventory policy for technology products that see rapid innovation and improvement, such as smartphones, is a vital decision. While the market life cycle is short, with long lead times and expensive deliveries. Such situations can force the number of orders to be few or even only once. Products with the latest technology consist of many components that allow for deterioration from the start. This study discusses the effect of the market life cycle, as indicated by the trapezoidal demand rate, on deteriorating item inventory policies. This study will provide new insights into inventory policy. Mathematical models with a non-linear generalized reduced gradient approach can find the optimal end of the selling period and the order size to achieve maximum profit. A sensitivity analysis showed several findings that provide insight for management