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Abstract:We consider a two-echelon inventory system with a manufacturer operating from a warehouse supplying multiple distribution centers (DCs) that satisfy the demand originating from multiple sources. The manufacturer has a finite production capacity and production times are stochastic. Demand from each source follows an independent Poisson process. We assume that the transportation times between the warehouse and DCs may be positive which may require keeping inventory at both the warehouse and DCs. Inventory in both echelons is managed using the base-stock policy. Each demand source can procure the product from one or more DCs, each incurring a different fulfilment cost. The objective is to determine the optimal base-stock levels at the warehouse and DCs as well as the assignment of the demand sources to the DCs so that the sum of inventory holding, backlog, and transportation costs is minimized. We obtain a simple equation for finding the optimal base-stock level at each DC and an upper bound for the optimal base-stock level at the warehouse. We demonstrate several managerial insights including that the demand from each source is optimally fulfilled entirely from a single distribution center, and as the system's utilization approaches 1, the optimal base-stock level increases in the transportation time at a rate equal to the demand rate arriving at the DC.

We consider a two-echelon production inventory system with a manufacturer having limited production capacity and a distribution center (DC). There is a positive transportation time between the manufacturer and the DC. Customers gain a value by receiving the product and incur a waiting cost when facing a delay. We assume that customers' waiting cost depends on their degree of impatience with respect to delay, which is captured by a convex waiting cost function. Customers are strategic with respect to joining the system and either place an order or balk from the system upon their arrival depending on their expected waiting time. We study the Stackelberg equilibrium assuming that the DC acts as a Stackelberg leader and customers are the followers. We first obtain the total expected revenue and then provide a heuristic to derive the optimal base-stock levels in the warehouse and the DC as well as the optimal price of the product.

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This article presents a new model for pricing a new product considering skimming pricing strategy in the presence of the competition. We consider two periods for price setting including skimming and economy period. The problem is deciding on a skimming price as well as an economy price in order to maximize the total profit. The derived model is a non-linear programming model and we analyzed the structure and properties of optimal solution to develop a solution method. Analytical results as well as managerial insights are presented by mathematical analysis and numerical analysis.