Impact of demand uncertainty on coordinating supply chain inventories through common replenishment epochs

Abstract

Prior studies have shown that inventories in a one vendor, multi-buyer supply chain with deterministic demands can be coordinated effectively through the use of common replenishment epochs (CRE). In this paper, we study the impact of demand uncertainty on the effectiveness of coordinating such a supply chain. We develop a model to analyse the coordination mechanism using CRE in a one-vendor, multi-buyer supply chain, when the demand faced by the buyers is stochastic. Our numerical study based on the model found that coordination through CRE may not always be beneficial when the demand variance is high. We also investigate a strategy of advance order processing by the vendor to improve the effectiveness of coordination through CRE.

Keywords:

• one-vendor multi-buyer supply chain
• inventory coordination
• joint replenishment
• common replenishment epochs