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On the replenishment policy when the market demand information is lagged

Hosoda, Takamichi and Disney, Stephen Michael 2012. On the replenishment policy when the market demand information is lagged. International Journal of Production Economics 135 (1) , pp. 458-467. 10.1016/j.ijpe.2011.08.022

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We consider a situation where the most up-to-date information on the market demand and the inventory levels is not available to a replenishment decision maker in a single echelon of a supply chain. The objective of the decision maker is to minimise the sum of the inventory and the production costs. An intuitively attractive strategy under this setting might be to reduce the information time lag as much as possible by utilising information technologies such as RFID. We call this strategy the Time lag Elimination Strategy (TES). However, this course of action requires investment in information systems and will incur a running cost. We propose an alternative strategy that has similar economic consequences as the TES strategy, but it does not require new information systems. We call this strategy the Controlling Dynamics Strategy (CDS). The benefit coming from CDS is quantified and is compared to that from TES. We also quantify the benefits gained from the combined use of these two strategies. A new ordering policy is introduced that is easy to implement without any forecasting systems and can reduce the production cost significantly.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Uncontrolled Keywords: Time-lag; Information delay ; The order-up-to policy ; The base stock policy ; AR(1) process
Publisher: Elsevier
ISSN: 0925-5273
Last Modified: 10 Mar 2020 17:18

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