Inventory Replenishment Decisions Under Continuous Review System

30 Pages Posted: 30 Dec 2013

See all articles by Amin Kaboli

Amin Kaboli

Laboratory for Production Management and Processes, Ecole Polytechnique Fédérale de Lausanne (EPFL), CH-1015 Lausanne, Switzerland

Naoufel Cheikhrouhou

Geneva School of Business Administration

Rémy Glardon

Ecole Polytechnique Fédérale de Lausanne

Date Written: January 20, 2013

Abstract

Inventory managers mostly do not follow normative optimization models. At best they introduce a level of bounded rationality instead of full rationality in their inventory replenishment decisions. In this paper, we examine the behavior of inventory managers in a continuous review system within a decentralized supply chain. We implement an experimental approach with unknown market demand and local information availability. The analysis reveals that not only the magnitude and the variability of order quantity tend to be larger, but also the order time intervals is lengthen and highly variable while moving upstream along the supply chain. We also investigate how the inventory managers’ replenishment decisions influence echelons holding, backorder, and total costs. Results show that the large order quantities and long order time intervals induced by the inventory managers increase their holding and backorder costs in the upstream supply chain. Results also suggest that reduction in the variability of customer order quantity significantly decreases the upstream supplier total cost.

Keywords: Behavioral operations management, Continuous Inventory replenishment, Supply chain, Laboratory experiment

Suggested Citation

Kaboli, Amin and Cheikhrouhou, Naoufel and Glardon, Rémy, Inventory Replenishment Decisions Under Continuous Review System (January 20, 2013). Available at SSRN: https://ssrn.com/abstract=2372746 or http://dx.doi.org/10.2139/ssrn.2372746

Amin Kaboli (Contact Author)

Laboratory for Production Management and Processes, Ecole Polytechnique Fédérale de Lausanne (EPFL), CH-1015 Lausanne, Switzerland ( email )

EPFL STI IGM LGPP
ME A1 383 (Bâtiment ME) Station 9
Lausanne, 1015
Switzerland

HOME PAGE: http://people.epfl.ch/amin.kaboli

Naoufel Cheikhrouhou

Geneva School of Business Administration ( email )

Rue de la Tambourine 17
Geneva, Carouge 1227
Switzerland

Rémy Glardon

Ecole Polytechnique Fédérale de Lausanne ( email )

Route Cantonale
Lausanne, 1015
Switzerland

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