Inventory coordination in supply chain management

Motivated by industry examples, we explore in this thesis mechanisms that could better coordinate inventory pooling in supply chain management through better information system and faster and more efficient logistics system. Specifically, we (1) show that viable control systems that use system wide information coupled with enhanced logistics to achieve coordination can be developed, and (2) determine the incremental value provided by such control systems relatively to appropriately chosen benchmarks. These goals will be demonstrated by studying two representative archetypes. In the first system we consider a stochastic assembly system that manufactures two products, each assembled at a distinct assembly plant. Each product is assembled from two components, one unique to each product, the other common to both products. There are two component plants one producing unique components and the other the common component. Our analysis focuses on the performance of the system that consists of the two component plants. In particular, we are interested in developing an approach to better coordinate order fulfillment across these two component plants. Coordination is achieved by using a First-Use-First-Serve (FUFS) allocation discipline that uses instantaneous system wide inventory information to allocate available common components and rapidly move them to the desired location. By comparing system performance with that of an appropriate benchmark system, we show that the FUFS discipline improves system performance measures. For the second system, we develop and analyze a model of a firm selling a product over a single period using a network of retailers. In addition, some stock may be kept at a warehouse. If a retailer faces a stock-out, the system compels the use of an expedited delivery to meet this demand with excess inventory from another location. For this retail system we consider four related configurations that differ in how expedited delivery is used. We develop structural results including the necessary and sufficient condition under which it is beneficial to stock inventory at the warehouse. Our results suggest that while coordination resulting from pooling inventory in this system does significantly increase system performance, there is limited incremental benefit from holding inventory in reserve at the warehouse