COORDINATED REPLENISHMENT SYSTEMS WITH DISCOUT OPPORTUNITIES

In many practical situations, coordination of replenishment orders for a family of items can lead to considerable cost savings. A well-known class of strategies for the case where cost savings are due to reduce d joint ordering costs is the class of can-order strategies. However, these strategies, which are simple to implement in practice, do not ta ke discount possibilities into account. We propose a method to incorpo rate discounts in the framework of can-order strategies. A continuous review multi-item inventory system is considered with independent comp ound Poisson demand processes for each of the individual items. Discou nts are offered by the supplier as a percentage of the total dollar va lue whenever this value exceeds a given threshold. Starting from the c an-order strategy as a basic decision rule, we develop a simple heuris tic to evaluate these discount opportunities. The performance of the c an-order strategy with discount evaluation is compared with that of an other class of discount evaluation rules as proposed by Miltenburg and Silver.