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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Omega, Volume 37, Issue 4, August 2009, Pages 896–908
Drop shipping is used by online as well as traditional retailers as an order fulfillment strategy. A retailer simply forwards customers’ orders to the manufacturer or a distributor who fills the orders directly to the customers and is paid a predetermined price by the retailer. For the retailer, advantages of drop shipping include lower holding, handling, and shortage costs. Disadvantages include increased per-unit cost, fragmented order delivery when a single customer order involves products from different manufacturers, longer delivery times, and increased order processing cost. In this paper, we develop two (Q,R)Q,R) inventory models that allow a retailer to use the drop-shipping option in case of a shortage during lead-time. In the first model, the units short are backordered whereas in the second model sales are lost. We provide closed-form results for exponential and uniform demand distributions. We perform numerical sensitivity analysis and illustrate the results with numerical examples.
The ability to provide a good customer service level in e-business is critical to the success of e-retailers. According to Saliba , “fulfillment problems have been an ongoing nightmare for many e-retailers.” An Accenture study  found that “during the crucial holiday season, as many as 67% of online deliveries were not received as ordered, and 12% were not received in time for the Christmas holiday.” PricewaterhouseCoopers, found similar results with shoppers identifying order fulfillment as their most persistent frustration for online shopping . High-speed communication and tight connectivity brought about by the Internet enable supply chains to be much more flexible and enhance their ability to improve customer service . The ability to use drop shipping to respond to customers’ demand is such an improvement provided by the Internet. With drop shipping, an e-retailer simply forwards customer orders to manufacturers who fulfill those orders directly to the customers for a predetermined price to be paid by the e-retailer ,  and . This paper is motivated by an actual case of a manufacturer who offers its large retail customers to drop ship products to their customers when the retailers have a stockout and have an order outstanding with the manufacturer. The manufacturer currently charges the retailers the same per-unit cost for drop shipping as for regular replenishment orders. The drop-shipping option is currently offered only to large retail customers. The manufacturer is contemplating offering drop shipping to all its retail customers at a premium over the per-unit cost of the regular replenishment orders. The problem facing the retailers is to develop an inventory policy that takes into account the drop-shipping option. To investigate the effect of drop shipping on non-perishable inventory systems, we consider its use in a continuous-review order quantity reorder-point (Q,R)(Q,R) inventory model . Under the (Q,R)(Q,R) policy, a retailer orders Q units when inventory position falls to R units. The Q units arrive after a fixed deterministic lead-time has elapsed. Shortages during lead-time are treated as lost sales, backorders to be satisfied when the order arrives, or a combination of both . In this paper, we formulate two (Q,R)(Q,R) inventory models in which retailers use a drop-shipping option when a shortage occurs during lead-time. In the first model, the units short are backordered whereas in the second model sales are lost. We derive closed-form expressions for the optimal solutions under exponential and uniform demand distributions. We perform numerical sensitivity analysis and solve some examples. Our findings indicate that the availability of the drop-shipping option will decrease both the optimal reorder point and the optimal order quantity. This decrease is largest when the ratio of the per-unit drop-shipping penalty cost relative to the backorder cost is small, the per-unit holding cost is large, and the lead-time is long. In such a case, the optimal reorder point may become zero. Furthermore, the analysis indicates that the drop-shipping option effect on the optimal reorder point and the optimal order quantity depends on whether the fraction of demand which cannot be drop shipped during stockouts is backordered or lost. For the case of lost demand, if unit profit margin is high then the availability of drop shipping will have only a small effect on inventory policy, especially when the fraction of demand which can be drop shipped is small.
نتیجه گیری انگلیسی
Drop shipping can be used by online as well as traditional retailers to satisfy demand during shortages and also as a strategy to reduce costs and increase customer satisfaction. Drop shipping has significant advantages over holding inventory. These advantages include savings in the shipping, handling, holding, processing, and obsolescence costs for the retailer, as well as increased sales for the manufacturer. In spite of its advantages, drop shipping cannot be used as the only option for satisfying demand because a single customer order may include products from different manufacturers and therefore will be fragmented. This fragmentation causes an increase in shipping costs and a decrease in customer satisfaction. In this paper, we developed two (Q,R)Q,R) inventory models that allow retailers to use the drop-shipping option in case of a shortage during lead-time. In the first model, the units short are backordered whereas in the second model sales are lost. We provided closed-form results for exponential and uniform demand distributions. The results from the models show that the drop-shipping option is more valuable when the lead-time is long, the ordering cost relative to the holding cost is small, and the backorder cost relative to the holding cost is also small. Future research may involve extensions to multi-product inventory systems in which some products can be drop shipped while others cannot, the products are ordered jointly, and the firm operates under a budget and/or storage constraint. When items are jointly replenished, a periodic review model  is more suitable since it provides larger economies of scale in shipping.