Coordination Mechanisms in Decentralized Serial Inventory Systems with Batch Ordering

Authors:
Kevin H. Shang;Jing-Sheng Song;Paul H. Zipkin
Affiliations:
Fuqua School of Business, Duke University, Durham, North Carolina 27708;Fuqua School of Business, Duke University, Durham, North Carolina 27708/ and Antai College of Economics & Management, Shanghai Jiao Tong University, 200052 Shanghai, China;Fuqua School of Business, Duke University, Durham, North Carolina 27708
Venue:
Management Science
Year:
2009

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Abstract

This paper studies a periodic-review, serial supply chain in which materials are ordered and shipped according to (R,nQ) policies. Three information scenarios are considered, depending on the level of information available: echelon, local, and quasilocal. In the echelon scenario, each stage can access the inventory and cost information within its echelon (comprising the stage itself and all downstream stages); in the local scenario, each stage only accesses its own local information. Finally, in the quasilocal scenario, each stage knows its local information, plus the actual customer demands. We propose coordination schemes that regulate the stages to achieve the supply chain's optimal cost under each information setting. All these coordination schemes fit comfortably within an emerging practice called supply chain finance, which includes the organization and technology needed to implement them.