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Exact and heuristic algorithms for inventory rationing in a divergent supply chain with order costs

Author

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  • Brijesh Paul
  • Chandrasekharan Rajendran

Abstract

This paper addresses the development of an inventory control mechanism and inventory rationing policies in a static divergent two-stage supply chain consisting of one single distributor and several retailers. The unsatisfied demand is assumed to be backlogged at both distributor's and retailers' ends. In the case of shortage at distributor, the available stock on hand is rationed among the retailers. Most of the studies in the literature treat ordering costs as negligible and assume the review period to be one unit of time. However, if there is a significant cost associated with the order placement, then the review period can be greater than one time unit. Hence, in this study, we consider ordering costs for retailers, and present a mathematical programming model which can give optimal base-stock levels and review periods and inventory rationing (in the class of periodic review, order-up-to S policy). A genetic algorithm-based heuristic algorithm is also presented for solving problems with a large time horizon.

Suggested Citation

  • Brijesh Paul & Chandrasekharan Rajendran, 2010. "Exact and heuristic algorithms for inventory rationing in a divergent supply chain with order costs," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 6(4), pages 381-416.
    • Handle: RePEc:ids:ijisen:v:6:y:2010:i:4:p:381-416
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