Coordinated inventory and transportation decisions in a two-stage supply chain with alternative supply sources

A two-stage supply chain with two distribution centers (DCs) and two retailers is analyzed. Each member of the supply chain uses a (Q, R) inventory policy, and each DC is able to serve both retailers, but with different transportation cost structures. The retailers are identical and face independent Poisson end customer demand. Both DCs place orders to an outside supplier that has unlimited capacity. Two different scenarios are compared. Under the first scenario, each DC is assigned to a retailer. If a retailer or DC is out of stock then demand is backlogged. Under the second scenario, each DC is assigned to a specific retailer like in the first case, but in this case, if a DC is out of stock, the retailer has the option of either waiting for that DC or placing an order from the other DC with a higher transportation cost. These two scenarios are compared with respect to overall system cost.

Proceedings of the 35th International Conference on Computers and Industrial Engineering, ICC and IE 2005

Coordinated inventory and transportation decisions in a two-stage supply chain with alternative supply sources Conference Paper