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Evaluation of a Postponement System with an (r, q) Policy

  • T.C. Edwin ChengEmail author
  • Jian Li
  • C.L. Johnny Wan
  • Shouyang Wang
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Part of the International Series in Operations Research & Management Science book series (ISOR, volume 143)

In this chapter we study the cost impact of the pull postponement strategy by comparing the total average cost function with the optimal or an approximately optimal total average cost of an (\(r, q\)) policy. This is a stochastic model of a single end-product supply chain that consists of a supplier, a manufacturer and a number of customers. We develop two distinct models to represent the inventory system of the manufacturer. We employ Markov chain analysis to determine the exact average inventory level and the exact average accumulated backorder per period at the steady state so that the total average cost can be evaluated analytically. Also, we design an algorithm to find a near optimal total average cost per period. Our results show that the postponement system is more cost effective when the lead-time is zero, while the (\(r, q\)) inventory system is more effective when the lead-time is greater than zero.

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • T.C. Edwin Cheng
    • 1
    Email author
  • Jian Li
    • 2
  • C.L. Johnny Wan
    • 1
  • Shouyang Wang
    • 3
  1. 1.Department of Logistics & Maritime StudiesThe Hong Kong Polytechnic UniversityKowloonHong Kong SAR
  2. 2.School of Economics & Management Beijing University of Chemical Technology (BUCT)BeijingChina, People’s Republic
  3. 3.Chinese Academy of Sciences Academy of Mathematics & Systems ScienceBeijingChina, People’s Republic

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