Abstract
This paper studies a periodic review inventory system for perishable products with correlated demand on a finite horizon. In this system, a fixed quantity of products from the supplier is received in each period. This quantity must be determined before the first period and cannot be changed thereafter. The inventory level can be adjusted through purchasing and selling products in an electronic marketplace at the beginning of each period. The available supply and demand quantities in the electronic marketplace depend on the prices offered by the retailer. The retailer’s optimal purchasing and selling quantities, and respective prices in the electronic marketplace are computed, and the expected total cost is shown to be convex with respect to the order quantity from the supplier, which enables an efficient algorithm in obtaining the optimal order quantity. Numerical experiments show that greater cost savings from electronic marketplace are obtained when demands in different periods are strongly correlated and greatly differ from each other.
Similar content being viewed by others
References
Cohen MA, Pekelman D (1978) LIFO inventory systems. Manage Sci 24(11):1150–1162
Elmaghraby W, Keskinocak P (2003) Dynamic pricing in the presence of inventory considerations: research overview, current practices and future directions. Manage Sci 49(10):1287–1309
Federgruen A, Heching A (1999) Combined pricing and inventory control under uncertainty. Oper Res 47(3):454—475
Geoffrion AM, Krishnan R (2003a) E-Business and management science: mutual impacts (Part 1 of 2). Manage Sci 49(10):1275–1286
Geoffrion AM, Krishnan R (2003b) E-Business and management science: mutual impacts (Part 2 of 2). Manage Sci 49(11):1445–1456
Grieger M (2003) Electronic marketplaces: a literature review and a call for supply chain management research. Euro J Oper Res 144(2):280–294
Grossman TA, Rohleder TR, Silver EA (2000) A negotiation aid for fixed-quantity contracts with stochastic demand and production. Int J Prod Econ vol 66, pp 67–76
Kahn J (1987) Inventories and the volatility of production. Am Econ Rev 77:667–679
Keskinocak P, Tayur S (2001) Quantitative analysis for Internet-enabled supply chains. Interfaces 31(2):70–89
Lee HL, So KC, Tang CS (2000) The value of information sharing in a two-level supply chain. Manage Sci 46(5):626–643
Miller B (1986) Scarf’s state reduction method, flexibility, and a dependent demand inventory model. Oper Res 34(1):83–90
Nahmias S (1982) Perishable inventory theory: a review. Oper Res 30(4):680–708
Rockafellar RT (1970) Convex analyis, Chapter 5, pp 38–39. Princeton University Press, Princeton
Simchi-Levi D, Wu D, Shen Z (2004) Handbook of quantitative supply chain analysis : modeling in the e-business era. Kluwer Dodrecht
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Bao, J., Lee, C. & Lee, L.H. The value of Electronic Marketplace in a perishable product inventory system with auto-correlated demand. OR Spectrum 29, 627–641 (2007). https://doi.org/10.1007/s00291-006-0073-0
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00291-006-0073-0