Internet book retailing and supply chain management: an analytical study of inventory location speculation and postponement

• Published in: Transportation research. Part E, Logistics and transportation review Vol. 41; no. 3; pp. 159 - 177
• Main Authors: Bailey, Joseph P., Rabinovich, Elliot
• Format: Journal Article
• Language: English
• Published: Exeter Elsevier India Pvt Ltd 01.05.2005; Elsevier; Elsevier Sequoia S.A
• Series: Transportation Research Part E: Logistics and Transportation Review
• Subjects: Electronic commerce; Internet; Inventory; Inventory management; Inventory management Electronic commerce Postponement; Postponement; Retail stores; Studies; Supply chain management; United States > US; Inventory management; Postponement; Electronic commerce
• ISSN: 1366-5545; 1878-5794
• DOI: 10.1016/j.tre.2004.03.004

Internet retailing models support supply chains where consumer order locations are decoupled from inventory locations. In this setting, retailers dynamically consider inventory location speculation and postponement to fulfill their orders. Particularly, retailers can manage inventory to fulfill orders through two opposing strategies: in-stock inventory and drop-shipping. This paper extends the supply chain management literature by modeling Internet retailers' decisions to balance their offerings between these two strategies. The results show how retailers depend more on both of these strategies as their market share and product popularity increase. Thus, both inventory management strategies may be considered simultaneously to better manage Internet retailers' inventory.