19. Notations Used: H : Inventory holding cost per product per unit time at the DC A : Orderingcost at the DC D : Shipment cost at the DC h : Inventory holding cost per product per unit time at the Retailer b : Backlog cost per product per unit time at the Retailer P : Ordering cost at the Retailer
CharacteristicsPeriodic review with interval TReorder point RBasic reorder quantity QInventory Position(IP): [R+1, R+Q] after orderingE.g.: Assume R = -1, Q = 3IP = On hand inventory + Outstanding orders – BacklogIP(T+dt) = nQ – IP(T)
Here we assume R=-1 for the DC.The optimal parameters T, R (S) are obtained from the simulation.are derived from the base case by varying the ordering cost (A, P), demand rate (λ), inventory holding cost (H, h), backlog cost (b), and shipment cost (D).The second stage is mainly developed for statistical analysis of the results. The above described experiments are repeated for S=0 and R=0 scenarios.
The result for the base case alone is presented here.Table 1 shows the base case and various scenarios considered in this paper. The corresponding optimal values from first stage for the base case are as shown in Table 2.
Figure 3 and Figure 5 has the cost for cases where there is no inventory at the retailer i.e., S=0 or R=0. Every demand is backlogged and as a result the cost of supply chain increases considerably.
along with the increase inordering cost. This holds good for both the cases when there isinventory (Figure 2 and Figure 4) and, zero or noinventory (Figure 3 and Figure 5) at the retailer.
Table 3 results indicate that it is better to hold the inventory at the retailer than at the DC which decreases the demand response time, and in the latter case inventory levels are kept low to reduce the inventory carrying cost. In both cases, because of the ordering cost involved an (S, S-1) policy places more number of orders than (R, T) policy resulting in a higher cost.
than it is for a periodic review policy when there is an ordering cost. The inventory policies used in the retailer does not make much of a difference when the ordering cost is very low. hence it is preferred to hold inventory at the retailer.
with one member at each echelon. This supply chain structure is only a simplified The cost structure included in this model does not take into account the lost sales cost at the distribution center.
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