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Effectiveness of ( R, Q ) policies in one‐warehouse multiretailer systems with deterministic demand and backlogging
Author(s) -
Chen Fangruo
Publication year - 2000
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/1520-6750(200008)47:5<422::aid-nav4>3.0.co;2-v
Subject(s) - stockout , warehouse , reorder point , stock (firearms) , operations research , holding cost , economic order quantity , total cost , computer science , point (geometry) , business , safety stock , lead time , average cost , economies of scale , operations management , economics , microeconomics , mathematics , supply chain , marketing , mechanical engineering , geometry , engineering
Consider a distribution system with a central warehouse and multiple retailers. Customer demand arrives at each of the retailers continuously at a constant rate. The retailers replenish their inventories from the warehouse which in turn orders from an outside supplier with unlimited stock. There are economies of scale in replenishing the inventories at both the warehouse and the retail level. Stockouts at the retailers are backlogged. The system incurs holding and backorder costs. The objective is to minimize the long‐run average total cost in the system. This paper studies the cost effectiveness of ( R, Q ) policies in the above system. Under an ( R, Q ) policy, each facility orders a fixed quantity Q from its supplier every time its inventory position reaches a reorder point R . It is shown that ( R, Q ) policies are at least 76% effective. Numerical examples are provided to further illustrate the cost effectiveness of ( R, Q ) policies. © 2000 John Wiley & Sons, Inc. Naval Research Logistics 47: 422–439, 2000