Inventory optimization model considering consumer shift and inventory transshipment in dual-channel supply chains

Abstract

In this paper we consider a dual-channel supply chain which consists of an online store and multiple independent retail stores. In this system, customer shift induces inventory competition while transshipment brings inventory cooperation, both of which inuences inventory optimization and control. Therefore we respectively construct inventory optimization models under the two situations: customer shift and inventory transshipment. Specifically, unilateral customer shift and inventory transshipment are considered, and a one-for-one replenishment strategy is applied. We first solve the equilibrium state probability of on-hand inventory through Markov chain theory, then optimize performance measure (i.e., the total costs) to obtain the optimal basic inventory level. Finally, we analyze the impact of customer shift rate and inventory transshipment rate on the inventory strategies through numerical simulation, and further compare the differences in inventory decisions between the above two situations, which prove that inventory cooperation brought by inventory transshipment is not necessarily better than inventory competition brought by customer shift. In addition, we discuss several insights that are evident from the parametric analysis of the model.

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