Title: A replenishment control system with uncertain returns and random opportunities for disposal

Authors: Ben A. Chaouch

Addresses: Odette School of Business, University of Windsor, Ontario N9B 3P4, Canada

Abstract: We consider a replenishment control system in which product returns play an important role in inventory planning. We focus on the inventory of an individual item that is stored at a single location to meet a constant demand over time. We assume that the total amount of returns accumulated over a period of time can be represented by a compound Poisson process. We further assume that opportunities for inventory disposals or relocation arise occasionally in accordance with a Poisson process. We not only seek to resolve the issues of when to order and how much to order, we also consider the question of when to dispose of excess inventory and by how much. Inventory reductions occur when the opportunity for a disposal arises and the inventory position is deemed too high. After each disposal the inventory position is restored to a specified base-stock level. We develop a cost model of this system and highlight its properties through an extensive numerical study.

Keywords: inventory management; product returns; random disposal; stochastic models; level-crossing theory; replenishment control; uncertain returns; inventory planning; excess inventory; cost modelling.

DOI: 10.1504/IJIR.2011.045383

International Journal of Inventory Research, 2011 Vol.1 No.3/4, pp.221 - 247

Published online: 07 Mar 2015 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article