Application of the newsvendor model with re-ordering opportunity in two-echelon supply chains

Document Type

Article

Publication Date

1-1-2011

Abstract

In this paper, we extend the application of the single period stochastic inventory model, known as the newsvendor model, to cover lot sizing in two-echelon supply chains where re-ordering opportunities are permitted to the downstream members of the echelon. An analytical model is proposed to determine the optimum lot size for the different echelons of the supply chain in a newsvendor environment. The model with the re-ordering opportunity under a decentralised and under a centralised decision scenarios are developed and compared with reference to the standard model with single-order opportunity. Results show that the re-ordering opportunity reduces the total cost for the chain. Moreover, the analytical results developed for the uniform and exponential demand distributions as well as the numerical experiments performed exhibit that optimising each echelon individually, under the re-ordering opportunity assumption, leads to almost the same cost as considering the entire chain collectively. Copyright © 2011 Inderscience Enterprises Ltd.

Identifier

84857309796 (Scopus)

Publication Title

International Journal of Integrated Supply Management

External Full Text Location

https://doi.org/10.1504/IJISM.2011.044887

e-ISSN

17418097

ISSN

14775360

First Page

270

Last Page

283

Issue

3-4

Volume

6

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