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Optimal Inventory Location and Control in Production and Distribution Networks

Author

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  • Fred Hanssmann

    (Operations Research Group, Case Institute of Technology, Cleveland, Ohio)

Abstract

The problem of finding optimal inventory control schemes has received considerable attention in the literature for the case of one inventory at a given location in a production process or distribution system. Almost no analytical work has been devoted to systems of interacting inventories at different locations, and to the problem of selecting optimal inventory locations from a number of possible ones. This is the subject of the present paper. The traditional cost-of-shortage concept is given up in favor of a functional relation between expected demand and average delivery time to the customer. The measure of system performance is sales revenue minus inventory carrying cost. A method employing a combination of dynamic programming and a one-dimensional maximization procedure, yields the optimal inventory locations as well as the corresponding order rules.

Suggested Citation

  • Fred Hanssmann, 1959. "Optimal Inventory Location and Control in Production and Distribution Networks," Operations Research, INFORMS, vol. 7(4), pages 483-498, August.
    • Handle: RePEc:inm:oropre:v:7:y:1959:i:4:p:483-498
    DOI: 10.1287/opre.7.4.483
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    Cited by:

    1. Vanteddu, Gangaraju & Chinnam, Ratna Babu & Gushikin, Oleg, 2011. "Supply chain focus dependent supplier selection problem," International Journal of Production Economics, Elsevier, vol. 129(1), pages 204-216, January.
    2. Whybark, D. Clay & Yang, Shitao, 1996. "Positioning inventory in distribution systems," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 271-278, August.
    3. Sebastian Wieczerniak & Piotr Cyplik & Jaroslaw Milczarek, 2018. "Mistakes During The Management Of Supply Chains And Methods Of Analysis These Reasons," Business Logistics in Modern Management, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 18, pages 565-582.
    4. Petrovic, Dobrila & Roy, Rajat & Petrovic, Radivoj, 1999. "Supply chain modelling using fuzzy sets," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 443-453, March.
    5. Liberopoulos, George & Tsikis, Isidoros & Delikouras, Stefanos, 2010. "Backorder penalty cost coefficient "b": What could it be?," International Journal of Production Economics, Elsevier, vol. 123(1), pages 166-178, January.
    6. David Simchi-Levi & Yao Zhao, 2005. "Safety Stock Positioning in Supply Chains with Stochastic Lead Times," Manufacturing & Service Operations Management, INFORMS, vol. 7(4), pages 295-318, December.
    7. Ernst, Ricardo & Powell, Stephen G., 1995. "Optimal inventory policies under service-sensitive demand," European Journal of Operational Research, Elsevier, vol. 87(2), pages 316-327, December.
    8. Simpson, N.C., 2007. "Central versus local multiple stage inventory planning: An analysis of solutions," European Journal of Operational Research, Elsevier, vol. 181(1), pages 127-138, August.
    9. Weng, Z. Kevin, 1998. "Managing production with flexible capacity deployment for serial multi-stage manufacturing systems," European Journal of Operational Research, Elsevier, vol. 109(3), pages 587-598, September.

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