A two-echelon inventory system with transportation capacity constraint

Huang, Haibo; Chew, Ek Peng; Goh, Mark

doi:10.1016/j.ejor.2004.01.051

Cited by 14 publications

(8 citation statements)

References 13 publications

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“…Huang et al (2005) consider a discrete-time, single-warehouse, multiple-customer transportation and inventory planning problem facing constant demand in which there is a fixed transportation capacity available in each period to make deliveries to customers from the warehouse. Their problem can be re-posed as a version of our problem but without standard batch size restrictions and without consideration of material handling costs.…”

Section: Literature Reviewmentioning

confidence: 99%

Cheaper by the pallet? Multi-item procurement with standard batch sizes

2012

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This research was motivated by challenges facing inventory managers at a major retail chain in deciding how often to order each product and whether to use a standard batch size of a pallet, a half-pallet, or even less. The retailer offers thousands of different products, but the total demand for a typical product is only a few pallets per year. Manufacturers offer lower per unit prices for larger standard batch sizes, but larger order quantities increase inventory holding costs. The inventory managers are also concerned about how the ordering strategy might affect transportation costs and material handling costs at the warehouse.We develop a framework and solution strategy to determine the best shipment frequency, standard batch size (from a set of options), and an ordering plan for a set of products procured from a single supply location. To do so, the inventory holding and material handling costs incurred by a single product are derived for a given review interval and standard batch size. We incorporate the individual product costs into an optimization model to find, for a given transportation interval (with a limit on transport capacity for each shipment), the best procurement plan considering variable procurement, inventory, material handling, and excess transportation costs. With this, several transportation intervals can be compared and the best one selected. To the best of our knowledge, this work is the first to consider the effects of transportation capacity and standard batch sizes in a multi-item procurement problem with the goal of minimizing transportation, inventory, and material handling costs. larger standard batch sizes. On the other hand, larger order quantities increase inventory holding costs. If items were ordered in full pallet quantities, average inventory levels might amount to months of supply. Under such policies, it was difficult to improve inventory turnover.The inventory managers also had the perception that larger order quantities led to greater material handling costs. In view of this, we decided to include the most significant elements of the material handling costs in our model. We elaborate on these costs later in this article.The standard batch size also affects variable purchasing costs. Retailers typically negotiate prices with suppliers on the basis of annual sales volume and standard procurement quantities. If the retailer does not always order exactly the same quantity (e.g., sometimes half pallets and sometimes full pallets), the actual purchase costs may depend upon the mix of quantities. Quite often, the manufacturer's pricing is driven by volume and the minimum purchase quantity. As such, we initially assume that the retailer simply orders standard batch quantities (usually one at a time

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Section: Literature Reviewmentioning

confidence: 99%

Cheaper by the pallet? Multi-item procurement with standard batch sizes

2012

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“…All-unit-discount transportation cost structures with and without over declaration have been considered in their work. Huang et al [10] consider a two-level supply chain in which a warehouse delivers its products to many retailers. Each retailer faces a constant and deterministic demand.…”

Section: -Introductionmentioning

confidence: 99%

Economic Order Quantity in a Centralized Two-Level Supply Chain with Transportation Cost

Baboli

Neghab

Haji

2006

2006 International Conference on Service Systems and Service Management

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This paper considers a two-level supply chain consisting of one warehouse and one retailer. Unlike the most similar models which determine the optimal ordering policy according to inventory cost only, in this model, we also consider the transportation cost. We assume that the demand rate at the retailer is known and the demand is confined to a single item. Shortages are allowed neither at the retailer nor at the warehouse. The objective is to find the economic order quantities for both the retailer and the warehouse which minimize the total cost. That is, the sum of the holding and ordering cost at the retailer and warehouse as well as the transportation cost from warehouse to retailer. Numerical results show savings can be made by this model in comparison to the model of optimal ordering policy in which the transportation cost is not considered.

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“…Inderfurth and Minner (1998) investigate an analytical model to determine safety stocks considering as constraint different service levels; Chen and Krass (2001) propose a new inventory approach, based on the minimal service-level constraint, which consists in achieving a minimum defined service level in each period; Huang et al (2005) study the impact of the delivery mode on a one-warehouse multi-retailer system to evaluate the optimal inventory ordering time and the economic lot size for reducing total inventory costs;…”

Section: Introductionmentioning

confidence: 99%

“…Giannoccaro and Pontrandolfo (2002) propose an artificial intelligence algorithm to manage inventory decisions at all SC stages (optimising the performance of the global SC by using a simulation approach). Huang et al (2005) solve the ordering and positioning retailer inventories problem at the warehouse and stores, satisfying specific customer demand and minimising total costs by using neural network approaches. For simulation models development, different commercial software and programming languages have been adopted: Bertazzi et al (2005) implement in C++ a vendor-managed inventory policy to minimise purchasing, replenishment and delivery total costs; Lee and Wu (2006) model the reorder point-order quantity (RPOQ) and the periodic review order-up policy of a distribution system by using the commercial package eM-Plant™ while Al-Rifai and Rossetti (2007) adopt Arena™ for testing a new analytical model for a two-echelon inventory system.…”

Section: Introductionmentioning

confidence: 99%

Inventory and internal logistics management as critical factors affecting the supply chain performances

Curcio

Longo

2009

IJSPM

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This paper focuses on the inventory and internal logistics management problem within a specific Supply Chain (SC) node (a Distribution Centre (DC)). The objective is twofold: to monitor the performance of different inventory control policies under distinct operative scenarios and to reduce the Internal Logistic Costs (ILCs) by investigating the effect of some critical parameters (i.e., the number of incoming/outgoing trucks from suppliers/to retailers, the number of forklifts and lift trucks, etc.) for increasing the service level provided to final retailers and allocating internal resources efficiently. To this end, a simulation model of a real DC is implemented.Reference to this paper should be made as follows: Curcio, D. and Longo, F. (2009) 'Inventory and internal logistics management as critical factors affecting the supply chain performances', Int.

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A two-echelon inventory system with transportation capacity constraint

Cited by 14 publications

References 13 publications

Cheaper by the pallet? Multi-item procurement with standard batch sizes

Cheaper by the pallet? Multi-item procurement with standard batch sizes

Economic Order Quantity in a Centralized Two-Level Supply Chain with Transportation Cost

Inventory and internal logistics management as critical factors affecting the supply chain performances

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