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Inventory allocation models for a two-stage, two-product, capacitated supplier and retailer problem with random demand

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  • Luo, Kai
  • Bollapragada, Ramesh
  • Kerbache, Laoucine

Abstract

The objective of this research is to develop an optimal inventory allocation methodology for a supply chain consisting of a capacitated retailer with limited shelf space, and two unreliable capacitated suppliers in an uncertain environment. We develop conceptual and analytical models that provide allocation preferences between shelf-space and warehouse in both deterministic and stochastic demand cases, and develop managerial insights based on them. For each case, we provide both a closed-form solution and a heuristic method, and illustrate the bounds on the optimal solution. Further, we show that the cost function is L⋄-convex in some cases. Finally, we prove that the expected profit decreases as the variance of demand increases.

Suggested Citation

  • Luo, Kai & Bollapragada, Ramesh & Kerbache, Laoucine, 2017. "Inventory allocation models for a two-stage, two-product, capacitated supplier and retailer problem with random demand," International Journal of Production Economics, Elsevier, vol. 187(C), pages 168-181.
    • Handle: RePEc:eee:proeco:v:187:y:2017:i:c:p:168-181
    DOI: 10.1016/j.ijpe.2016.12.014
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    Cited by:

    1. Raul Oltra-Badenes & Hermenegildo Gil-Gomez & Jose M Merigo & Daniel Palacios-Marques, 2019. "Methodology and model-based DSS to managing the reallocation of inventory to orders in LHP situations. Application to the ceramics sector," PLOS ONE, Public Library of Science, vol. 14(7), pages 1-19, July.

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