Optimal coordination of purchasing, inventory and demand management

This research is motivated by the long-standing problems faced by one large wholesaler in Hong Kong, which plays the role as a sourcing agent for over a thousand of worldwide clients on hundreds of products. Around forty percent of the commodities are sold via contracts, and the remaining sixty percent are on an ex-stock basis, of which future demand patterns are very uncertain. The company has been facing several operational problems. Firstly, the company constantly suffers from short of warehouse space, incurring extra costs for acquiring public storage. Secondly, warehouse records the company has a very low inventory turnover rate, while in-house storage space is long occupied by low value and slow moving items, giving rise to cash being tied up and high opportunity cost. Thirdly, the product managers in the purchasing department find difficulties in determining the right order sizes based on historical data and forecasted demands, which often causes significant discrepancies between actual and planned sales…

Contents

CHAPTER 1 INTRODUCTION
1.1. BACKGROUND OF THE STUDY
1.2. OBJECTIVES AND SCOPE OF THE STUDY
1.3. THESIS ORGANIZATION
CHAPTER 2 LITERATURE REVIEW
2.1. CONSTRAINED OPTIMIZATION ON MULTI-ITEM REPLENISHMENT PROBLEM
2.1.1 WSP
2.1.2 Multi-storage facilities
2.2. JOINT REPLENISHMENT PROBLEMS (JRP)
2.2.1 Can-order policy
2.2.2 Periodic review inventory system
2.3. PERISHABLE INVENTORY PROBLEM
2.3.1 Fixed lifetime commodities
2.3.2 Deteriorating inventory model with price discounts
2.3.3 Deteriorating inventory model with two-storage facilities
2.4. DEMAND MANAGEMENT WITH PRICING STRATEGY
2.4.1 Manage supply solely
2.4.2 Manage demand solely
2.4.3 Manage supply and demand simultaneously
2.5. DISCUSSION
CHAPTER 3 METHODOLOGIES AND MODELING
3.1. METHODOLOGIES
3.1.1 Current System Operations’ Analysis
3.1.1.1 Localized objective
3.1.1.2 Lack of system coordination in decision making process
3.1.1.3 No controlling power on goods flow
3.1.1.4 Lack of product coordination in purchasing department
3.1.1.5 Insufficient information flow
3.1.2 Problem solving principles
3.1.2.1 Order aggregation
3.1.2.2 Cross docking
3.1.2.3 Demand management
3.1.3 Overall modeling framework
3.1.3.1 Planning Stage
3.1.3.2 Control & Implementation Stage
3.2. MODELING
3.2.1 Planning Stage: Base Model
3.2.1.1 Model assumption and description
3.2.1.2 Formulation of mixed-integer linear programming
3.2.2 Planning Stage: Model with Order Aggregation
3.2.2.1 Model assumption and description
3.2.2.2 Formulation of mixed-integer linear programming
3.2.3 Control & Implementation Stage: Stock-pushing Mechanism
3.2.3.1 Model assumption and description
3.2.3.2 Model formulation
CHAPTER 4 NUMERICAL ILLUSTRATION AND EXPERIMENTAL TESTING
4.1. PLANNING STAGE: BASE MODEL
4.1.1 Numerical Illustration
4.1.1.1 Scenario description
4.1.1.2 Data description
4.1.1.3 Model implementation
4.1.1.4 Result illustration
4.1.2 Sensitivity analysis
4.1.2.1 The capacity on cross docking
4.1.2.2 Fixed operating cost of cross docking
4.1.2.3 Perishability of the products
4.2.1 Numerical Illustration
4.2.1.1 Scenario and data description
4.2.1.2 Result illustration
4.2.2 Experimental testing
4.2.2.1 Opportunities for order aggregation
4.2.2.2 Minor to major fixed ordering cost ratio
4.3. CONTROL & IMPLEMENTATION STAGE: STOCK-PUSHING MECHANISM
4.3.1 Numerical Illustration
4.3.1.1 Scenario and data description
4.3.1.2 Result illustration
CHAPTER 5 LARGE-SCALE PROBLEMS
5.1. METHODOLOGY
5.1.1 Meta Level
5.1.1.1 Model formulation
5.1.2 Product Level
5.1.2.1 Model formulation
5.2. REAL CASE APPLICATION AND ILLUSTRATION
5.2.1 Data preparation
5.2.2 Result illustration
5.2.2.1 Meta level
5.2.2.2 Product level
CHAPTER 6 CONCLUSION AND FUTURE STUDIES
6.1. CONCLUSION
6.1.1 The base model
6.1.2 Model II: model with order aggregation
6.1.3 Stock-pushing mechanism
6.1.4 Large-scale problems
6.2. RESEARCH CONTRIBUTIONS
6.3. FUTURE STUDY

Author: Chen, Yi Kwan

Source: City University of Hong Kong

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