Paper Info
Title
Coordination mechanisms for inventory control in three-echelon serial and distribution systems
Abstract
This paper is concerned with the coordination of inventory control in three- echelon serial and distribution systems under decentralized control. All installations in these supply chains track echelon inventories. Under decentralized control the installations will decide upon base stock levels that minimize their own inventory costs. In general these lev- els do not coincide with the optimal base stock levels in the global optimum of the chain under centralized control. Hence, the total cost under decentralized control is larger than under centralized control. To remove this cost inefficiency, two simple coordination mechanisms are presented: one for serial systems and one for distribution systems. Both mechanisms are initiated by the most downstream installation(s). The upstream installation increases its base stock level while the downstream installation compensates the upstream one for the increase of costs and provides it with a part of its gain from coordination. It is shown that both coordination mechanisms result in the global optimum of the chain being the unique Nash equilibrium of the corresponding strategic game. Furthermore, all installations agree upon the use of these mechanisms because they result in lower costs per installation. The practical implementation of these mechanisms is discussed.
Year
DOI
Venue
2008
10.1007/s10479-007-0239-4
Annals OR
Keywords
Field
DocType
Supply chain,Inventory control,Strategic game,Nash equilibrium,Multi-echelon system,Coordination mechanism
Mathematical optimization,Decentralised system,Distribution system,Operations research,Inefficiency,Global optimum,Inventory control,Supply chain,Nash equilibrium,Total cost,Mathematics
Journal
Volume
Issue
ISSN
158
1
0254-5330
Citations 
PageRank 
References 
1
0.35
9
Authors
2
Name
Order
Citations
PageRank
Henk Zijm131.06
Judith Timmer210115.67