Inventory sharing and planning coordination in centralized and decentralized systems

In this dissertation, we study three problems under the context of coordination within and between firms. In the first two problems, we study the coordination through inventory sharing between two retailers of a manufacturer. Inventory sharing (transshipment) is one of the retailer cooperation strategies, which refers to transferring inventory among retailers or distribution centers in case of a stock-out. In practice several retailers can be owned by the manufacturer or by a single owner, or some retailers can be individually owned. Then the problem of how to establish efficient coordination mechanisms in centralized and decentralized systems raise two different questions.;On the other hand, the coordination in planning decisions of a single manufacturer is another question. Especially, when individual interests and performance measures of different departments do not cover the system objective exactly, there may be significant conflicts within a firm. Thus, the cost of conflicts between the departments should be investigated to understand how important it is to make joint decisions.;The first chapter is an introduction to each of the problems under study. In Chapter 2, we introduce and analyze a centrally-managed model of a manufacturer and two retailers, where replenishment decisions are made by considering possible transshipments between two replenishments. Different from previous studies, multiple in-cycle transshipments, periodically incurred holding and backorder costs, and a positive transshipment time are all allowed. The model results in an optimal transshipment policy characterized by hold-back inventory levels. With extensive analyses, the sensitivity of transshipment policies to parameters and the benefit of optimal transshipments policies are investigated. The model is extended to consider positive replenishment lead times, where the resulting analytical difficulties are handled by proposing an efficient approximate solution, based on the upper bound cost. Chapter 3 studies a decentralized system of an inventory sharing model, where each retailer is individually managed. The flow of the unsatisfied customers between retailers is also considered to investigate the effect of competition on cooperation decisions. Analyses indicate that optimal transshipment policies of retailers are characterized by non-stationary hold-back inventory levels as in Chapter 2, but changing in the reverse directions during an operating cycle. Because of inventory sharing and demand flow interactions between retailers during a cycle, initial ordering decisions form a non-cooperative game. For the retailers' ordering game, existence of an equilibrium solution is analyzed and numerically shown. The study is enriched by extensive numerical analyses showing the benefit of cooperation for both retailers and the manufacturer.;In Chapter 4, we study coordination issues between the distribution and the production decisions of a manufacturer who is producing and distributing two types of perishable products. Because of significant set-up costs in production and vehicle costs in distribution, each department favors batching of customer orders in their schedule. However, the batching decisions of a department may result in conflicts for the schedule of the other department. Specifically, we study the local optimization of production schedules, the local optimization of distribution schedules by the distributor, and the joint optimization of production and distribution schedules to improve overall system performance in a perishable products environment.