Inventory consideration and management in two supply chain problems

Abstract

Inventory management has become increasingly important in various logistics and supply chain problems and it has received much attention from both researchers and practitioners in recent decades. This thesis studies both strategic and operational supply chain problems that incorporate inventory consideration and management. The strategic supply chain problem studied is a joint facility location-allocation and inventory problem that incorporates multiple sources. The problem is motivated by a real situation faced by a multinational applied chemistry company. In this problem, multiple products are produced in several plants. A warehouse can be replenished by several plants together because of capabilities and capacities of plants. Each customer in this problem has stochastic demand and a certain amount of safety stock must be maintained in warehouses so as to achieve a certain customer service level. The problem is to determine the number and locations of warehouses, allocation of customers demand and inventory levels of warehouses so as to minimize the expected total cost with the satisfaction of desired demand weighted average customer lead time and desired cycle service level. The problem is formulated as a mixed integer nonlinear programming model. Utilizing approximation and transformation techniques, we develop an iterative heuristic method for the problem. An experiment study shows that the proposed procedure performs well in comparison with a lower bound. The operational supply chain problem considered is a multi-channel component replenishment problem in an assemble-to-order system. It is motivated by real situations faced by some contract manufacturers. The assemble-to-order manufacturer faces a single period stochastic demand of a single product consisting of multiple components. Before product demand is realized, the manufacturer needs to decide on initial ordering quantities of components (called pre-stocked components). After the demand is realized, the needed components which cannot be filled from inventory can be replenished through multiple sourcing channels with different prices and lead times. The manufacturer then needs to decide on timing, quantities and sourcing channels of additional components to order, as well as final product delivery schedule. We show some good properties according to the structure of the problem. Based on the properties, we formulate the problem as a stochastic programming model and we solve a restricted version of our problem in which the quantities of pre-stocked components follow a certain fixed rank order. We then provide a closed-form optimal solution for dual-channel two-component problem and we develop a branch and bound method for multi-channel multi-component problem to search over all permutations to obtain the optimal solution. We also present a greedy heuristic procedure. We finally offer a computational experiment to demonstrate the efficiency of our solution methods and to compare the performance of assemble-to-order systems with single and dual procurement channels, respectively.