E Teimouri - Department of Industrial Engineering Iran University of Science and Technology
H Mirzahosseinian
A Kaboli

The advent of e-commerce has prompted many manufacturers to redesign their traditional channel structure by engaging in direct sales. In this paper, we present a dual channel inventory model based on queuing theory in a manufacturer-retailer supply chain, consisting of a traditional retail channel and a direct channel which stocks are kept in both upper and lower echelon. Also, the product is available in two supply channels, the traditional retail store and the direct channel. The system receives stochastic demand from the both channel which each channel has an independent demand arrival rate. The demand of retail customers is met with the on-hand inventory from the bottom echelon while the demand in the internet-enabled channel is fulfilled through direct delivery from the upper echelon. A one-for-one inventory control policy is applied. A lost-sales model which no backorder is allowed is supposed. Also, customers are lost when both the retail store and the manufacturer warehouse are out of stock simultaneously; moreover, the customer lost sale cost is differing in each channel. The replenishment lead times are assumed independent exponential random variables for both warehouse and the retail store. Under the replenishment inventory policy, the inventory position is kept constant at a base-stock level. To analyze the chain performance, an objective function included holding and lost sales costs is defined and a heuristic approach is proposed to find a proper solution for inventory

Supply chain management; Direct channel; Stochastic demand; Heuristic approach