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Developing a model for a two-echelon two-item inventory system with lost sale and demand substitution

Akbari Jokar, M. R ; Sharif University of Technology | 2006

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  1. Type of Document: Article
  2. DOI: 10.1109/ICMIT.2006.262357
  3. Publisher: 2006
  4. Abstract:
  5. Almost all multi-echelon inventory models assume that demands which are not satisfied immediately can be backordered. In some situations, this assumption may not be realistic. For example, we can model stockouts as lost sales when the retailers are in a competitive market and customers can easily turn to another retailer for purchasing goods. So, in this study, assuming lost sales at the retailers, we consider a one-warehouse, several retailers, two-item inventory system where the items can be interchangeably used. Using the well-known METRIC-approximation as a framework, we present a heuristic for finding cost effective base-stock policies. In a numerical study with simulation, we find that the cost of the policies that is gained by the heuristic is on average 12% above the cost of the optimal (S-1,S) policy. © 2006 IEEE
  6. Keywords:
  7. Computer simulation ; Heuristic algorithms ; Mathematical models ; Numerical methods ; Purchasing ; Sales ; Inventory models ; Inventory systems ; Model stockouts ; Inventory control
  8. Source: 2006 IEEE International Conference on Management of Innovation and Technology, ICMIT 2006, Singapore, 21 June 2006 through 23 June 2006 ; Volume 2 , 2006 , Pages 926-930 ; 1424401488 (ISBN); 9781424401482 (ISBN)
  9. URL: https://ieeexplore.ieee.org/document/4037155