Inventory control in the presence of an electronic marketplace

L. H. Lee, Chul Ung Lee, J. Bao

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

This paper studies a periodic review inventory model in the presence of an electronic marketplace (EM). Emergency orders can be placed in the EM for additional cost, and excess inventory can be sold to the EM. When the order leadtime from the supplier is one period, the optimal inventory control policy is developed from a dynamic programming model of the problem. The policy is characterized by three critical inventory levels. When the order leadtime from the supplier is longer than one period, an EM policy is developed to determine the quantities of inventory to purchase from and sell to the EM in each period. Based on this EM policy, three ordering policies are proposed to determine the order quantity from the supplier. Numerical results show that significant cost reductions can be obtained by using the EM to adjust the inventory level in each period. The amount of cost reduction is greatly affected by system parameters, especially the order leadtime from the supplier and the costs for transactions in the EM.

Original languageEnglish
Pages (from-to)797-815
Number of pages19
JournalEuropean Journal of Operational Research
Volume174
Issue number2
DOIs
Publication statusPublished - 2006 Oct 16
Externally publishedYes

Keywords

  • Electronic marketplace
  • EM policy
  • Inventory control
  • Ordering policy

ASJC Scopus subject areas

  • Information Systems and Management
  • Management Science and Operations Research
  • Statistics, Probability and Uncertainty
  • Applied Mathematics
  • Modelling and Simulation
  • Transportation

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