Inventory Allocation in a Buyback System - Applying the Multiplayer Newsvendor Model to the Book Trade Example

Abstract

The aim of the article is to analyze an inventory allocation problem in a buyback/consignment system. The investigation focus on a book publisher, which has contact with a number of wholesalers and retailers and maintains a part of their inventories for direct sales. The publisher has to determine the printed quantity (initial inventory level) a given newly published book and make decision about the allocation in the distribution channels. The publisher is assumed to have a consignment or buyback agreement with the retailers, since these are the most common forms of contracts in book industry. The model is based on a newsboy problem, in a one-warehouse and $n$-retailer supply chain with demand estimated by Poisson distribution.