Power-of-two single-warehouse multi-buyer inventory coordination with private information
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abstract
This paper considers the problem of coordinating a single-warehouse multi-buyer inventory system with private information where the objective is to find a replenishment policy for each facility in the system such that the total average ordering and inventory-related cost of the entire system is minimized. It is assumed that the objective function, and setup and inventory holding cost parameters of each facility are regarded as private information that no other facilities in the system have access to. Moreover, each facility is responsible to specify its own replenishment policy for a given demand. Power-of-two inventory theory is used to develop a heuristic for coordinating the inventory system given complete information. In turn, the heuristic is modified to solve the problem under private information. Both heuristics are applicable to systems where the cost functions are convex. In addition, the proposed heuristics are 94% effective if all the facilities adopt the classical EOQ assumptions. 2007 Elsevier B.V. All rights reserved.
