Inventory management in firms that market products in multiple channels
Date of Issue2017
College of Business (Nanyang Business School)
In addition to traditional channels such as catalogs and brick-and-mortar stores, merchants are now offering touch points like web storefronts and mobile apps. The introduction of new channels revolutionizes shopping experience and has made managers revise supply chain design. We refer to marketing a product in more than one channel as multichannel marketing. In Chapter 1, we review the latest literature on managing a supply chain in which multiple channels can reach customers. This is to develop a framework on which our work is based. Both theoretical findings and practical executions are included. Chapter 2 studies the reorder points in a serial distribution system. In such a system, goods are delivered to the final stage via a series of intermediate stages. Customers buy from the final stage. Intermediate stages may advertise goods to make demand stable at the final stage. A stage orders with its upper stage if downstream inventory drops to or below the reorder point. A new method for calculating inventory cost is developed. The optimal reorder point at each stage is found to be balancing the marginal costs in the subsystem downstream and in the immediate stage upstream. In Chapter 3, we consider how to manage inventory in a firm that sells from the warehouse and through a brick-and-mortar store. The firm orders new supplies from the supplier periodically and there is a fixed ordering cost associated with each order. Stocks in the warehouse and the store are redistributed on a regular basis. We determine when to order, how much to order and how to redistribute so that the resulting total cost is minimized. After that, we propose two methods to reduce inventory-related costs. One is steering customers to the low-cost channel and the other is guiding customers to the channel that has stock. We discuss their suitability for various situations numerically. In Chapter 4, we address whether multiple channels should carry the same or different products in the face of competition.