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Supply chain games: modeling in an intertemporal framework with periodic review

Part of the International Series In Operations Research & Management Science book series (ISOR, volume 113)

In this chapter we consider firms which employ a periodic review policy and handle products characterized by a relatively short life-cycle, so that a single inventory update at a predetermined point on the production horizon (i.e., two-period approach) may suffice to identify demand over the remaining part of the production horizon. Fisher et al. (2000) reported an example of this approach in the apparel industry where highly accurate demand forecasts were made after observing only 11% of demand. Fisher and Raman (1996) reported further examples in which very accurate forecasts were obtained after observing 20% of demand.

The point of update is assumed to be chosen from previous experience and may generally involve different considerations, such as the change from high- to off-season, expected customer fatigue towards the product, or the impact of competitors catching up with production of a similar product. As a result, demand realization determined for the second part of the production horizon may be different from that observed for the first part. In contrast to the previous chapter, where customer demand along with inventories was observed either continuously or only by the end of production horizon, we assume here that an update is possible before the end of the horizon and that the probability distribution of demand for the second part of the production horizon depends on demand realization over the first part of the production horizon (see also Kogan et al. 2004, 2007; Kogan and Herbon 2007).

Keywords

Supply Chain Inventory Level Switching Point Production Policy Periodic Review 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. Fisher M, Raman A, McClelland A (2000) Rocket science retailing is almost here-Are you ready? Harvard Business Review 78: 115-124.Google Scholar
  2. Fisher M, Raman A (1996) Reducing the cost of demand uncertainty through accurate response to early sales. Operations Research 44: 87-99.CrossRefGoogle Scholar
  3. Kogan K, Herbon A (2007) Optimal Inventory Control under Periodic Demand Update. EJOR, to appear.Google Scholar
  4. Kogan K, Lou S, Tapiero C (2007) Supply Chain With Inventory Review and Dependent Demand Distributions: Dynamic Inventory Outsourcing, Working paper.Google Scholar
  5. Kogan K, Shu C, Perkins J (2004) Optimal Finite-Horizon Production Control in a Defect-Prone environment. IEEE Transactions on Automatic Control 49(10): 1795-1800.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

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