E-Fulfillment and Multi-Channel Distribution – A Review

This review addresses the specific supply chain management issues of Internet fulfillment in a multi-channel environment. It provides a systematic overview of managerial planning tasks and reviews corresponding quantitative models. In this way, we aim to enhance the understanding of multi-channel e-fulfillment and to identify gaps between relevant managerial issues and academic literature, thereby indicating directions for future research. One of the recurrent patterns in today’s e-commerce operations is the combination of ‘bricks-and-clicks’, the integration of e-fulfillment into a portfolio of multiple alternative distribution channels. From a supply chain management perspective, multi-channel distribution provides opportunities for serving different customer segments, creating synergies, and exploiting economies of scale. However, in order to successfully exploit these opportunities companies need to master novel challenges. In particular, the design of a multi-channel distribution system requires a constant trade-off between process integration and separation across multiple channels. In addition, sales and operations decisions are ever more tightly intertwined as delivery and after-sales services are becoming key components of the product offering.Distribution;E-fulfillment;Literature Review;Online Retailing

An overview of inventory systems with several demand classes

In this chapter we discuss inventory systems where several demand classes may be distinguished. In particular, we focus on single-location inventory systems and we analyse the use of a so-called critical level policy. With this policy some inventory is reserved for high-priority demand. A number of practical examples where several demand classes naturally arise are presented, and the implications and modelling of the critical level policy in distribution systems are discussed. Finally, an overview of the literature on inventory systems with several demand classes is given

A Single-Product Inventory Model for Multiple Demand Classes

We consider a single-product inventory system that serves multiple demand classes, which differ in their shortage costs or service level requirements. We assume a critical-level control policy, and show the equivalence between this inventory system and a serial inventory system. Based on this equivalence, we develop a model for cost evaluation and optimization, under the assumptions of Poisson demand, deterministic replenishment lead-time, and a continuous-review (Q, R) policy with rationing. We propose a computationally-efficient heuristic and develop a bound on its performance. We provide a numerical experiment to show the effectiveness of the heuristic and the value from a rationing policy. Finally, we describe how to extend the model to permit service times, and to embed within a multi-echelon setting

Transshipments in a divergent two-echelon network using the consistent appropiate share rationing policy

Consider a two-echelon inventory system consisting of a central depot (CD) and a number of retailers. Only the retailers face customer demand. The CD is allowed to hold stock. In all stockpoints, the echelon inventory position is periodically raised to certain order-up-to-Ievels. At the central depot, incoming stock is allocated by using the consistent appropriate share rationing (CAS) policy. When the orders arrive at the retailers, an instantaneous rebalancing of the total net stock of the retailers takes place, so as to maintain all end-stockpoint inventory at a balanced position. This rebalancing is realized by the transshipment of stock, assuming that the time to transship stock from one retailer to another is negligible compared to the lead time between CD and a retailer. The objective of this analysis is the determination of all the control parameters (integral order-up-to-Ievel, parameters of allocation policy at the CD and of the rebalancing policy at the retailer), so that the desired (different) service levels are achieved at the retailers at minimal expected total costs. Exact expressions are developed to determine these parameters. However, we will use some heuristics to actually compute these parameters, because of the intractability of the exact expressions. All analytical results are validated by Monte-Carlo simulation. The model developed will be compared with the same model without periodic, instantaneous rebalancing at the retailer. This yields insight into the conditions under which transshipment could be useful

Inventory rationing in an (s, Q) inventory model with lost sales a two demand classes

Whenever demand for a single item can be categorized into classes of different priority, an inventory rationing policy should be considered. In this paper we analyse a continuous review (s,Q) model with lost sales and two demand classes. A so-called critical level policy is applied to ration the inventory among the two demand classes. With this policy, low--priority demand is rejected in anticipation of future high--priority demand whenever the inventory level is at or below a prespecified critical level. For Poisson demand and deterministic lead times, we present an exact formulation of the average inventory cost. A simple optimization procedure is presented, and in a numerical study we compare the optimal rationing policy with a policy where no distinction between the demand classes is made. The benefit of the rationing policy is investigated for various cases and the results show that significant cost reductions can be obtained