Cooperation in stochastic inventory models with continuous review


Boucherie, Richard J. and Chessa, Michela and Timmer, Judith (2010) Cooperation in stochastic inventory models with continuous review. [Report]

open access
Abstract:Consider multiple companies that continuously review their inventories and face Poisson demand. We study cooperation strategies for these companies and analyse if there exist allocations of the joint cost such that any company has lower costs than on its own; such allocations are called stable cost allocations. We start with two companies that jointly place an order for replenishment if their joint inventory position reaches a certain reorder level. This strategy leads to a simple expression of the joint costs. However, these costs exceed the costs for non-cooperating companies. Therefore, we examine another cooperation strategy. Namely, the companies reorder as soon as one of them reaches its reorder level. This latter strategy has lower costs than for non-cooperating companies. Numerical experiments show that the gametheoretical distribution rule — a cost allocation in which the companies share the procurement cost and each pays its own holding cost — is a stable cost allocation. These results also hold for situations with multiple companies.
Item Type:Report
Electrical Engineering, Mathematics and Computer Science (EEMCS)
Research Group:
Link to this item:
Publisher URL:
Export this item as:BibTeX
HTML Citation
Reference Manager


Repository Staff Only: item control page