Effective inventory policies for supply chain networks

In this research, efficient policies are developed for a variety of inventory models for supply chain management. These models include a series system with quantity discounts and a one-warehouse, multi-retailer system with frequency discounts. Other inventory problems to be explored will involve demand that is dependent on the retail price and less than truckload transportation costs.; In the first part of this research, power-of-two policies are developed for a series inventory system with an incremental quantity discount given to the first stage. Properties are derived for this model including the fact that an optimal policy is nested and has the zero-inventory ordering property. To prove the effectiveness of the power-of-two policies, a lower bound on the optimal cost is obtained. A policy that is within 6% of the lower bound is developed for a fixed base planning period. For a variable base planning period, a 98% effective policy is provided. An extension is included for a system with price dependent holding costs.; In future research, power-of-two policies will be derived for a one-warehouse, multi-retailer system with a discount on the purchasing price given to the warehouse. This discount is based on the long-run average order frequency. For the all-unit frequency discount model, a policy that is 94% effective will be developed. A 98% effective policy will be presented for the incremental frequency discount model.; Future research will also consider inventory policies to maximize profit in a system with demand that is dependent on the retail price. The proposed research will extend current results in the literature to power-of-two policies with variable base planning periods. These results will be generalized to include factors such as backlogging.; Another aspect of future research will involve transportation costs for less than truckload shipments. These costs are represented by a piecewise, non-decreasing, linear function of the quantity shipped at a given time. Other researchers have considered inventory problems with these costs and discrete demand, but the proposed research will explore models with continuous demand. After developing policies for basic systems, these results will be generalized to more complex systems with factors such as demand that is dependent on the retail price.