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Inter-Temporal Inventory Competition and the Effects of Capacity Constraints

International Journal of Production Economics, Forthcoming

7 Pages Posted: 8 Mar 2011  

Konstantin Kogan

Bar-Ilan University - Department of Management

Charles S. Tapiero

NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering

Date Written: March 7, 2011

Abstract

This paper addresses an inter-temporal inventory competition between a supplier (a provider, manufacturer) and a retailer engaged in a supply chain. The paper’s focus is on the effect of capacity constraints on both parties when demands are seasonal. The paper provides a comparative study of two solution approaches, one is based on supply chain competition and the other is based on system-wide optimization. Our results demonstrate that with dynamic inventory competition, the retailer reduces inventory costs by reducing the response period to higher demands while increasing the supply requests compared to the system-wide optimal approach. As a result, the supplier’s inventory costs increase. An example illustrating these particular facets of the problem and its application is presented and discussed in light of the supplier and the retailer coordinating policies.

Suggested Citation

Kogan, Konstantin and Tapiero, Charles S., Inter-Temporal Inventory Competition and the Effects of Capacity Constraints (March 7, 2011). International Journal of Production Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1780444

Konstantin Kogan

Bar-Ilan University - Department of Management ( email )

Ramat-Gan, 52900
Israel

Charles S. Tapiero (Contact Author)

NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering ( email )

Brooklyn, NY 11201
United States

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