One-for-one period policy and a series of suppliers

Abstract

The purpose of this paper is to adopt and analyze a new ordering policy called one-for-one-period policy in a multi-echelon supply chain consisting of one retailer and a series of N suppliers. The main advantage of adopting the one-for-one-period (/,7) ordering policy for retailers is the elimination of uncertainty for supplier which leads to total elimination of the safety stocks at all suppliers. This in tum leads to the reduction of the total system costs and in case any supplier's ordering cost is negligible it can even eliminate the need for him to carry any inventory. In addition to this advantage, the numerical results show that the application of this new policy for the retailer leads to the further advantage of outperforming the one-for-one (S-1,S) policy in terms of total multi-echelon system cost under specified conditions. We derive the minimum total cost for this multi-echelon system and provide a numerical example to shed light on the merits of the proposed model compared to the common practice as reported in the literature.

Pricing and inventory decisions in a vendor managed inventory system with revenue sharing contract

“…Haji and Haji (2007) demonstrated that 1, is outperforming 1, , specially in cases where lead time increases. Moreover, 1, policy has many advantages for upstream members of the supply chain, which has been already mentioned in section 1.…”

“…The retailer uses a new ordering policy called one-for-one period ordering 1, policy Haji and Haji (2007) in which an order of size one is placed at every fixed cycle time .…”

“…While it is well known that in case of stochastic demand, there is no inventory control policy in which both the order size and the order interval are constant with an optimal solution, Haji and Haji (2007) and later Haji et al (2009) proposed a new One-for-One period policy, in which one unit of product is ordered in each ordering period and so eliminating uncertainty in demand for suppliers. They derived the long-run average total inventory cost, consisting of holding and shortage costs in terms of the average inventory and showed that their cost function has a unique solution and they also formulated the optimal value of the time interval between two consecutive orders.…”

“…They derived the long-run average total inventory cost, consisting of holding and shortage costs in terms of the average inventory and showed that their cost function has a unique solution and they also formulated the optimal value of the time interval between two consecutive orders. For the one for one period policy, discussed in Haji and Haji (2007) an order for one unit of item is placed in a pre-determined time interval. Hence, both the order size and the order interval are constant.…”

“…Clark and Scarf (1960), Federgruen and Zipkin (1984), Chen and Zheng (1994) and Cachon and Zipkin (1999) demonstrate that an echelon base stock policy is the optimal policy in this system. Furthermore, Haji and Haji (2007) compared the performance of base stock policy and one for one period (1,T) policy and established advantages for the new policy as follows:…”