Browsing by Author "Shang, KH"

Now showing 1 - 2 of 2
  • Thumbnail Image
    ItemOpen Access
    Improving supply chain performance: Real-time demand information and flexible deliveries
    (Manufacturing and Service Operations Management, 2010-06-01) Shang, KH; Zhou, SX; Van Houtum, GJ
    In some supply chains, materials are ordered periodically according to local information. This paper investigates how to improve the performance of such a supply chain. Specifically, we consider a serial inventory system in which each stage implements a local reorder interval policy; i.e., each stage orders up to a local basestock level according to a fixed-interval schedule. A fixed cost is incurred for placing an order. Two improvement strategies are considered: (1) expanding the information flow by acquiring real-time demand information and (2) accelerating the material flow via flexible deliveries. The first strategy leads to a reorder interval policy with full information; the second strategy leads to a reorder point policy with local information. Both policies have been studied in the literature. Thus, to assess the benefit of these strategies, we analyze the local reorder interval policy. We develop a bottom-up recursion to evaluate the system cost and provide a method to obtain the optimal policy. A numerical study shows the following: Increasing the flexibility of deliveries lowers costs more than does expanding information flow; the fixed order costs and the system lead times are key drivers that determine the effectiveness of these improvement strategies. In addition, we find that using optimal batch sizes in the reorder point policy and demand rate to infer reorder intervals may lead to significant cost inefficiency. © 2010 INFORMS.
  • Thumbnail Image
    ItemOpen Access
    Optimal and Heuristic Echelon (r,nQ,T) policies in serial inventory systems with fixed costs
    (Operations Research, 2010-03-01) Shang, KH; Zhou, SX
    This paper studies a periodic-review, serial inventory system in which echelon (r,nQ,T) policies are implemented. Under such a policy, each stage reviews its inventory in every T period and orders according to an echelon (r,nQ,T) policy. Two types of fixed costs are considered: one is associated with each order batch Q, and the other is incurred for each inventory review. The objective is to find the policy parameters such that the average total cost per period is minimized. This paper provides a method for obtaining heuristic and optimal policy parameters. The heuristic is based on minimizing lower and upper bounds on the total cost function. These total cost bounds, which are separable functions of the policy parameters, are obtained in two steps: First, we decompose the total cost into costs associated with each stage, which include a penalty cost for holding inadequate stock. Second, we construct lower and upper bounds for the penalty cost by regulating downstream policy parameters. To find the optimal solution, we further construct cost bounds for each echelon (a subsystem that includes a stage and all of its downstream stages) by regulating holding and backorder cost parameters. The echelon lower-bound cost functions, as well as the stage cost bounds, generate bounds for the optimal solution. In a numerical study, we find that the heuristic is near optimal when the ratio of the fixed cost to the holding cost at the most downstream stage is large. We also find that changing the optimal batch sizes may not affect the optimal reorder intervals or, equivalently, the delivery schedules under some conditions. © 2010 INFORMS.