Inventory allocation and shipping when demand temporarily exceeds production capacity

► We study inventory allocation and shipping for a producer with limited capacity. ► We consider a manufacturer competing with other retailers to sell items. ► We identify the optimal inventory allocation strategy for a manufacturer. We address the concept of an integrated inventory allocation and s...

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Published inEuropean journal of operational research Vol. 227; no. 3; pp. 464 - 470
Main Authors Jang, Wooseung, Kim, Daeki, Park, Kwangtae
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 16.06.2013
Elsevier
Elsevier Sequoia S.A
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ISSN0377-2217
1872-6860
DOI10.1016/j.ejor.2013.01.013

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Summary:► We study inventory allocation and shipping for a producer with limited capacity. ► We consider a manufacturer competing with other retailers to sell items. ► We identify the optimal inventory allocation strategy for a manufacturer. We address the concept of an integrated inventory allocation and shipping model for a manufacturer with limited production capacity and multiple types of retailers with different backorder/waiting and delivery costs. The problem is to decide how to allocate and deliver produced items when the total retailer demand exceeds the production capacity, so that total retailer backorder and delivery costs are minimized. Our analytical model provides optimal allocation and shipping policies from the manufacturer’s viewpoint. We also investigate the allocation strategy of a manufacturer competing with other retailers to directly sell to end consumers.
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content type line 14
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2013.01.013