Comparing strategies for addressing delivery shortages in stochastic demand settings

In logistics networks involving one supply point (depot) and several geogra phically dispersed demand points (e.g., retail stores), delivery shortages will result if the design of delivery routes ignores random period-to-perio d fluctuations in customer demands. Delivery shortages may be costly enough for the depot to seek strategies to prevent them. A requirement for ration al comparison of strategies is quantifying their effects on total supply ch ain costs. Accurate distance prediction models are developed to help satisf y this prerequisite for the transportation cost element, These models are i ntegrated into a comparison of strategies on the basis of how these strateg ies affect inventory and transportation. The focus of findings from the com parison involves identifying the information cost thresholds for accepting/ rejecting a demand-responsive strategy. The study's implications for choosi ng a strategy are presented. (C) 1999 Elsevier Science Ltd. All rights rese rved.