Supply-chain modelling and control under proportional inventory-replenishment policies

A novel state-space model of a multi-node supply chain is presented, controlled via local proportional inventory-replenishment policies. The model is driven by a stochastic sequence representing customer demand. The model is analyzed under stationarity conditions and a simple recursive scheme is developed for updating its covariance matrix. This allows us to characterize the "bullwhip effect" (demand amplification) in the chain and to solve an optimization problem for a three-node model involving the minimization of inventory subject to a probabilistic constraint on downstream demand. Finally, issues related to estimation schemes based on local historical data are briefly discussed.

• Type: Journal
• Year: 2008
• Where: IJSYSC
• Authors: C. I. Papanagnou, G. D. Halikias
• Keywords: IJSYSC 2008, Local Proportional Inventory-replenishment, Model, Multi-node Supply Chain