Skip to main content

Inventory Positioning in Multiple Product Supply Chains

Abstract

In this paper we address the problem of inventory positioning, i.e., the determination of the supply chain node where inventory should be held, to minimize holding costs given a pre-specified order fill rate. A single-echelon inventory system with multiple products models the problem. The value of inventory is assumed to be an increasing function of the amount of processing performed at upstream nodes, while achieved fill-rates are dependent on the distance or time between the inventory storage and customer locations. We propose a novel analytical approach to solve the problem for the case of normally distributed demand that is based on iterative calculations of inventory holding costs at the various potential inventory locations.

This is a preview of subscription content, access via your institution.

References

  • Alderson, W. (1950). "Marketing Efficiency and the Principle of Postponement." Cost and Profit Outlook 3.

  • Belvaux, G. and L.A. Wolsey. (2001). "Modeling Practical Lot-Sizing Problems as Mixed-Integer Programs." Management Science 47(7), 993–1007.

    Google Scholar 

  • Bowersox, D.J. and D.J. Closs. (1996). Logistical Management: The Integrated Supply Chain Process. New York: McGraw-Hill.

    Google Scholar 

  • Bucklin, L.P. (1965). "Postponement, Speculation and the Structure of Distribution Channels." Journal of Marketing Research 2(2), 26–31.

    Google Scholar 

  • Dallery, Y. and G. Liberopoulos. (2000). "Extended Kanban Control System: Combining Kanban and Base Stock." IIE Transactions on Design and Manufacturing 32(4), 369–386.

    Google Scholar 

  • Davis, T. (1993). "Effective Supply Chain Management." Sloan Management Review, Summer, 35-46.

  • Ernest, R. and B. Kamrad. (2000). "Evaluation of Supply Chain Structures through Modularization and Postponement." European Journal of Operational Research 124, 495–510.

    Google Scholar 

  • Feitzinger, E. and H.L. Lee. (1997). "Mass Customization at Hewlett-Packard: The Power of Postponement." Harvard Business Review 75(1), 116–121.

    Google Scholar 

  • Graves, F.C. (1999). "A Single-Item Inventory Model for a Non-Stationary Demand Process." Manufacturing & Service Operations Management 1(1), 50–61.

    Google Scholar 

  • Graves, F.C. and S.P. Willems. (2000). "Optimizing Strategic Safety Stock Placement in Supply Chains." Manufacturing & Service Operations Management 2(1), 68–83.

    Google Scholar 

  • Hopp, W.J. and M.L. Spearman. (2001). Factory Physics: Foundations of Manufacturing Management. Chicago: Irwin.

    Google Scholar 

  • Ioannou, G., G. Prastacos, and G. Skintzi. (2001). "Inventory Positioning in Single Product Supply Chains." In Proceedings of the 3rd International Conference on the Analysis and Design of Manufacturing Systems, pp. 49-58.

  • Lee, H.L. and C. Billington. (1992). "Managing Supply Chain Inventory: Pitfalls and Opportunities." Sloan Management Review 33(3), 65–73.

    Google Scholar 

  • Lee, H.L., C. Billington, and B. Carter. (1993). "Hewlett-Packard Gains Control of Inventory and Service through Design for Localization." Interfaces 23(1), 1–11.

    Google Scholar 

  • Nahmias, S. (1997). Production and Operations Analysis. Chicago: Irwin.

    Google Scholar 

  • Shapiro, R.D. (1984). "Get Leverage from Logistics." Harvard Business Review 62(3), 119–126.

    Google Scholar 

  • Toktay, B.L. and L.M. Wein. (2001). "Analysis of a Forecasting-Production-Inventory System with Stationary Demand." Management Science 47(9), 1268–1281.

    Google Scholar 

  • Van Hoek, R.I. (1998). "Logistics and Virtual Integration: Postponement, Outsourcing and the Flow of Information." International Journal of Physical Distribution & Logistics 28(7), 508–523.

    Google Scholar 

  • Van Hoek, R.I. (2001). "The Rediscovery of Postponement in Literature Review and Directions for Research." Journal of Operations Management 19(2), 161–184.

    Google Scholar 

  • Winston, W.L. (1997). Operations Research: Applications and Algorithms. Belmont: Duxbury Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Ioannou, G., Prastacos, G. & Skintzi, G. Inventory Positioning in Multiple Product Supply Chains. Annals of Operations Research 126, 195–213 (2004). https://doi.org/10.1023/B:ANOR.0000012281.60737.a1

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:ANOR.0000012281.60737.a1

  • inventory management
  • supply chain design