The Impact of Demand Dependence on Optimal Inventory Level and Pooling Effect

Document Type : Original Article

Authors

1 Department of Quantitative Methods, Faculty of Economics and Management, University of Sfax 3018, Tunisia

2 Department of Industrial Engineering, College of engineering, University Taif, , P.O. Box 11099, Taif 219444, Saudi Arabia

10.22034/ijiems.2021.277913.1037

Abstract

In supply chain inventory management it is generally approved that inventory pooling is a suitable practice and studied its impact on expected profits under restrictive assumptions on demands distribution (Demands are often assumed to be independently and identically distributed and whenever demands dependence is included, it has been assuming bivariate or multivariate normal distribution). In this paper, we investigate the impact of pooling on stocks levels in addition to the impact of dependence on stocks levels when demand distributions do not follow the normality assumption. In addition, we analyze the impact of marginal distribution of demand (identical or no-identical) and distribution demand with different Skewness on the inventory level. Furthermore, we prove that the dependence structure, the coefficient of dependence, and the distribution of the local demands affect the value of the benefit of pooling using various copulas. Finally, the conditions under which the pooling is preferred to the no pooling case are likewise affected.

Keywords