Applying Postponement Strategy to a Multi-Warehouse Inventory Planning

Jishan Zhu; Yajun Yang
January 2011
Proceedings of the Northeast Business & Economics Association;2011, p593
Academic Journal
Consider a firm purchases the materials from overseas and operates multiple warehouses. Each warehouse serves a particular region. When one warehouse runs out the inventory, the firm has the option either to ship the stockout item from another warehouse or to source the item locally, but with significant costs. The firm does its best to avoid the material shortage at each warehouse. The inventory planning objective is to limit the stock-out risk under 5%. The firm faces long lead time when ordering the materials. One way to improve the inventory planning and reduce the stock-out risk is to delay the decision of destination warehouse in the purchase process. In this paper, we investigate and quantify the benefits of such postponement strategy.


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