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Distribution Planning for a Two-Echelon Distribution System under Fill Rate Constraints  

Kwon, Ick-Hyun (고려대학교 정보통신기술연구원)
Kim, Sung-Shick (고려대학교 정보경영공학부)
Kim, Chang-Ouk (연세대학교 정보산업공학과)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.31, no.4, 2006 , pp. 125-138 More about this Journal
Abstract
This paper considers a periodic review, two-echelon inventory system with one central warehouse and several re-tailers facing normally distributed demand. The goal is to attain target fill rates, while the systemwide total holding costs are minimized. An important aspect of this problem is material rationing in the case of shortages. If a central warehouse has insufficient inventory to deliver all replenishment orders to retailers, all order quantities are should be adjusted according to some rationing rule. A simple but efficient rationing rule is proposed and compared with the Balanced Stock (BS) rationing as introduced by Heijden which is known to be the best rationing policy in the literature. Numerical results show that the proposed rationing rule is more cost effective than BS rationing, especially for the differences in holding costs between retailers are large.
Keywords
Distribution Inventory System; Periodic Review; Normally Distributed Demand; Fill Rate; Rationing Rule;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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