Sensitivity Analysis of Partial Joint Ordering Policy in Multi-Location Distribution Systems
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Abstract
This research performs a sensitivity analysis on inventory replenishment for multiple demand locations using a partial joint ordering policy. Specifically, the study examines inventory replenishment for dispersed systems comprising five and ten locations. A performance index compares the partial joint ordering policy against a full joint ordering policy by calculating the ratio of their total inventory costs. The problem is formulated as a binary linear programming optimization model and solved using the Excel Solver to minimize total inventory cost. Sensitivity analysis is conducted to evaluate the impact of variable setup costs and demand levels on the total inventory cost of partial joint ordering. Variable setup costs are analyzed across a range from 2,000 to 40,000. The study considers dispersed location systems with both equal and unequal variable setup costs. Furthermore, demand is classified into two cases: equal value of 10,000 and unequal values between 8,000 to 22,000. The results show that for the distribution system having different demands, when variable setup cost increases, the performance index decreases. For five locations problem and ten locations with the unequal demands and high variable setup cost, the partial joint ordering gives the total inventory cost in average lower than the full joint ordering by 1.69% and 2.75%, respectively. The distribution system with high different dispersed demands, the partial joint ordering has an advantage in term of total inventory cost. On the other hand, the partial joint ordering is not advantageous when the dispersed demands are equal or not much difference.
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