Journal
PRODUCTION PLANNING & CONTROL
Volume 19, Issue 6, Pages 590-600Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/09537280802420571
Keywords
inventory management; supply chain; uncertainty; vendor-managed inventory; stochastic dynamic programming
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Funding
- Engineering and Physical Sciences Research Council (EPSRC) [EP/E000398/1, EP/F012918/1]
- EPSRC [EP/F012918/1, EP/E000398/1] Funding Source: UKRI
- Engineering and Physical Sciences Research Council [EP/E000398/1, EP/F012918/1] Funding Source: researchfish
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This article considers the inventory management problem in a supply chain with uncertain replenishment lead-times and uncertain demands. The optimal integrated inventory management (IIM) policy is developed using stochastic dynamic programming theory. The IIM policy is contrasted with two pull-type vendor-managed inventory policies (VMI-1 and VMI-2) and a traditional retailer-managed inventory policy (RMI). Computational results show that in such stochastic supply chains, IIM performs about 23, 15, and 3% better than the optimised RMI, VMI-1 and VMI-2 policies, respectively, while two VMI policies are about 8 and 20% better than the best RMI. The basestock-based VMI-2 is a very good form of VMI. The ANOVA analysis reveals that the replenishment lead-times have the largest effect on the relative performance between IIM and other policies. Numerical examples demonstrated that the IIM policy has good structural properties and can be characterised by a set of switching curves.
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