Analysis on coordinating supply chain inventory through common replenishment epochs

Chuang Chun Chiou*, Ming-Jong Yao, Jen Teng Tsai

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

In this paper, we analyze a supply chain model presented in Viswanathan and Piplani's (V&P) paper. In V & P's model, one vendor distributes a product to multiple buyers. The vendor offers a price-discount to entice the buyers to accept a pre-specified common replenishment epoch (CRE). In order to attract the buyers to follow the CRE strategy, the vendor's price-discount not only needs to compensate the buyers' cost increase in inventory, but also, to allure the buyers with extra purchase savings. Viswanathan and Piplani proposed a heuristic to solve this supply chain model, though we illustrate that some logic errors exist in their heuristic. In this study, we explore the optimality structure of V & P's model using a small-step search procedure. Interestingly, we discover that its optimal-cost curve is piece-wise linear with respect to price-discount. Our theoretical properties give good facilities for devising a search algorithm to secure a global optimal solution for V & P's model. Using a variety of numerical experiments, we confirm that the proposed search approach outperforms V & P's heuristic.

Original languageEnglish
Pages (from-to)57-63
Number of pages7
JournalJournal of the Chinese Institute of Industrial Engineers
Volume19
Issue number4
DOIs
StatePublished - 1 Jan 2002

Keywords

  • Common replenishment epochs
  • Minmax problem
  • Optimality structure
  • Price discount
  • Supply chain

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