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Optimising installation (R,Q) policies in distribution networks with stochastic lead times : a comparative analysis of guaranteed- and stochastic service models

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Abstract
This paper studies two modelling approaches to the multi-echelon inventory optimisation problem in a distribution network with stochastic demands and lead times. It compares the performance of a novel guaranteed-service model (GSM), using an installation (R, Q) inventory control policy, with a stochastic service model (SSM) considering ordering, holding and flexibility costs. From both cycle service level and fill rate perspectives, our numerical analysis of the 1-warehouse 2-retailer network shows that cost difference between both models is driven by the internal service level at the warehouse. The GSM outperforms the SSM for over 80% of the simulated instances and realises an average total cost improvement of approximately 10%. This analysis goes against earlier results that showed a relatively low-cost difference between the two approaches, and demonstrates that it is worthwhile to evaluate competing models for multi-echelon inventory optimisation in real-world supply chains with batch ordering and variable lead times.
Keywords
inventory control, distribution systems, multi-echelon, guaranteed-service, stochastic service, SAFETY STOCK OPTIMIZATION, SUPPLY CHAIN OPERATIONS, ASSEMBLY SYSTEMS, INVENTORY, MANAGEMENT

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MLA
De Smet, Niels, et al. “Optimising Installation (R,Q) Policies in Distribution Networks with Stochastic Lead Times : A Comparative Analysis of Guaranteed- and Stochastic Service Models.” INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH, vol. 57, no. 13, 2019, pp. 4148–1465.
APA
De Smet, N., Aghezzaf, E.-H., & Desmet, B. (2019). Optimising installation (R,Q) policies in distribution networks with stochastic lead times : a comparative analysis of guaranteed- and stochastic service models. INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH, 57(13), 4148–1465.
Chicago author-date
De Smet, Niels, El-Houssaine Aghezzaf, and Bram Desmet. 2019. “Optimising Installation (R,Q) Policies in Distribution Networks with Stochastic Lead Times : A Comparative Analysis of Guaranteed- and Stochastic Service Models.” INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH 57 (13): 4148–1465.
Chicago author-date (all authors)
De Smet, Niels, El-Houssaine Aghezzaf, and Bram Desmet. 2019. “Optimising Installation (R,Q) Policies in Distribution Networks with Stochastic Lead Times : A Comparative Analysis of Guaranteed- and Stochastic Service Models.” INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH 57 (13): 4148–1465.
Vancouver
1.
De Smet N, Aghezzaf E-H, Desmet B. Optimising installation (R,Q) policies in distribution networks with stochastic lead times : a comparative analysis of guaranteed- and stochastic service models. INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH. 2019;57(13):4148–1465.
IEEE
[1]
N. De Smet, E.-H. Aghezzaf, and B. Desmet, “Optimising installation (R,Q) policies in distribution networks with stochastic lead times : a comparative analysis of guaranteed- and stochastic service models,” INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH, vol. 57, no. 13, pp. 4148–1465, 2019.
@article{8573469,
  abstract     = {{This paper studies two modelling approaches to the multi-echelon inventory optimisation problem in a distribution network with stochastic demands and lead times. It compares the performance of a novel guaranteed-service model (GSM), using an installation (R, Q) inventory control policy, with a stochastic service model (SSM) considering ordering, holding and flexibility costs. From both cycle service level and fill rate perspectives, our numerical analysis of the 1-warehouse 2-retailer network shows that cost difference between both models is driven by the internal service level at the warehouse. The GSM outperforms the SSM for over 80% of the simulated instances and realises an average total cost improvement of approximately 10%. This analysis goes against earlier results that showed a relatively low-cost difference between the two approaches, and demonstrates that it is worthwhile to evaluate competing models for multi-echelon inventory optimisation in real-world supply chains with batch ordering and variable lead times.}},
  author       = {{De Smet, Niels and Aghezzaf, El-Houssaine and Desmet, Bram}},
  issn         = {{0020-7543}},
  journal      = {{INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH}},
  keywords     = {{inventory control,distribution systems,multi-echelon,guaranteed-service,stochastic service,SAFETY STOCK OPTIMIZATION,SUPPLY CHAIN OPERATIONS,ASSEMBLY SYSTEMS,INVENTORY,MANAGEMENT}},
  language     = {{eng}},
  number       = {{13}},
  pages        = {{4148--1465}},
  title        = {{Optimising installation (R,Q) policies in distribution networks with stochastic lead times : a comparative analysis of guaranteed- and stochastic service models}},
  url          = {{http://dx.doi.org/10.1080/00207543.2018.1518606}},
  volume       = {{57}},
  year         = {{2019}},
}

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