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The Logistics Impact of a Mixture of Order-Streams in a Manufacturer-Retailer System

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Author Info

  • Ananth V. Iyer

    ()
    (Krannert Graduate School of Management, 1310 Krannert Building, Purdue University, West Lafayette, Indiana 47907-1310)

  • Apurva Jain

    ()
    (University of Washington Business School, Box 353200, Seattle, Washington 98195-3200)

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    Abstract

    We model a supply chain with two retail warehouses that place replenishment orders with a common manufacturing capacity. The two retailers differ in the variability of their order-streams. The order-stream from one retail warehouse is modeled as a Poisson process and from the other as a hyperexponential renewal process. Each retail warehouse uses a base-stock policy to place replenishment orders with the manufacturer. The manufacturer is modeled as a first-come-first-serve, single exponential server queue. We analyze the supply-side impact of this mixture of order-streams received by the manufacturer on both retailers. An exact analysis of this base-model generates closed-form expressions for distributions of the lead-time, outstanding orders, and expected inventory costs for each retailer, and leads to comparative results about the two retailers- performance measures. The base-model is extended to accommodate finished goods at the manufacturer, more than two retailers, and bulk-arrivals. We use the model to suggest managerial insights about the impact of the presence of a high-variability retailer on other retailers who share capacity, the distorting impact of manufacturer finished goods inventory on retailer incentives, and the incentives for retailers to participate in variability-reduction programs in the grocery industry.

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    File URL: http://dx.doi.org/10.1287/mnsc.49.7.890.16378
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 49 (2003)
    Issue (Month): 7 (July)
    Pages: 890-906

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    Handle: RePEc:inm:ormnsc:v:49:y:2003:i:7:p:890-906

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    Related research

    Keywords: Queues with Multiple Arrival Processes; Retail Promotions; Stochastic Inventory/Production Systems;

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    Cited by:
    1. Jain, Apurva, 2007. "Value of capacity pooling in supply chains with heterogeneous customers," European Journal of Operational Research, Elsevier, vol. 177(1), pages 239-260, February.
    2. Sanajian, Nima & BalcIog[small tilde]lu, BarIs, 2009. "The impact of production time variability on make-to-stock queue performance," European Journal of Operational Research, Elsevier, vol. 194(3), pages 847-855, May.

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