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Inventory performance under staggered deliveries and auto-correlated demand

Hedenstierna, Carl and Disney, Stephen Michael 2016. Inventory performance under staggered deliveries and auto-correlated demand. European Journal of Operational Research 249 (3) , pp. 1082-1091. 10.1016/j.ejor.2015.09.060

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Production plans often span a whole week or month, even when independent production lots are completed every day and service performance is tallied daily. Such policies are said to use staggered deliveries, meaning that the production rate for multiple days are determined at a single point in time. Assuming autocorrelated demand, and linear inventory holding and backlog costs, we identify the optimal replenishment policy for order cycles of length P. With the addition of a once-per-cycle audit cost, we optimize the order cycle length P* via an inverse-function approach. In addition, we characterize periodic inventory costs, availability, and fill rate. As a consequence of staggering deliveries, the inventory level becomes cyclically heteroskedastic. This manifests itself as ripples in the expected cost and service levels. Nevertheless, the cost-optimal replenishment policy achieves a constant availability by using time-varying safety stocks; this is not the case with suboptimal constant safety stock policies, where the availability fluctuates over the cycle.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HD Industries. Land use. Labor
Uncontrolled Keywords: inventory, autoregressive demand, order-up-to-policy, staggered deliveries, planning cycles
Additional Information: Available online 9 October 2015
Publisher: Elsevier
ISSN: 0377-2217
Date of First Compliant Deposit: 30 March 2016
Date of Acceptance: 24 September 2015
Last Modified: 10 Mar 2020 17:21

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