Journal
DECISION SUPPORT SYSTEMS
Volume 54, Issue 1, Pages 133-141Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.dss.2012.04.012
Keywords
Lateral trans-shipments; Stochastic demand; Wholesaler operations; Inventory replenishment
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This paper develops a set of decision rules to assist wholesalers to decide whether it is more cost effective to trans-ship urgent outstanding retailer orders from other wholesalers, very fast but at a higher purchase cost, or to order from their suppliers. By considering the uncertainty in demand, it models the total cost encountered by wholesalers, including purchasing, backordering and holding costs in the inventory replenishment process. Unlike previous models that are complex, highly mathematical and difficult to apply, this model provides a pragmatic and less complex method adoptable by ordinary logistics managers and requires input data that are accessible from the previous transaction records of an organization. The application of the proposed decision rules are illustrated considering different scenarios of wholesaler-supplier combinations. (C) 2012 Elsevier B.V. All rights reserved.
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