DEALER INVENTORY MANAGEMENT SYSTEMS

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Abstract
This paper presents a model for analyzing inventory control policies for dealers that support the sales and service of manufactured goods. The environment faced by dealers is characterized by multiple stochastic demand classes (prioritized into emergency and regular), a principal source for boui emergency and regular requirements, multiple secondary sources for expedite requirements, and constraints on the lead time and service performance. We are concerned, in particular, with how dealers manage their inventory stockpiles and select expedite sources for replenishment when they have the option of prioritizing customers. The analysis is based on a periodic review, stochastic demand, (s,S) inventory model of dealer stock control. Exact Markov processes and approximate renewal based models are derived based on Cohen, Kleindorfer and Lee [4] and Cohen and Lee [5]. An approximation is used to develop a heuristic algorithm. Extensive numerical testing indicates that the algorithm generates solutions with acceptable cost and service penalties.