Ordering decisions of single period split order supply chain with various demand distributions

Abstract

This paper considers a two-echelon supply chain (SC) trading short life-cycle products whose production/delivery lead-times are longer than the selling season. We investigate the conventional single period inventory model and introduce the concept of splitting a single order into two orderings. The proposed split ordering model is compared with the case of single ordering in two scenarios: (1) decentralised case, where the SC members operate independently and (2) centralised case, where the SC members work together as a single system. The objective of this paper is to maximise the total expected profit and to reduce the risk of carrying inventory of short life-cycle products. We construct a dynamic programming model to determine optimal order quantity for the second period ordering, which considers leftover units and unmet demand in the first period to revise the order quantity in the second period. The proposed split ordering model considers ordering once ahead of the selling season and hence an additional set-up cost is not incurred for the second replenishment. Results that are taken using commercial software Mathematica 7 confirm better results over the current studies. Further, the proposed model is experimented for different demand distribution.