Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 131, Issue 3, Pages 603-610Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/S0377-2217(00)00102-8
Keywords
stochastic processes; dynamic programming; warehousing contracts; third-party logistics
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This paper considers multi-period warehousing contracts under random space demand. A typical contract is specified by a starting space commitment plus a certain number of times at which the commitment can be further modified. Three forms of contracts are analysed: (1) there is a restriction on the range of commitment changes and the schedule for the changes is preset by the warehouser; (2) the same as form (1) but there is no restriction on the range; (3) the same as form (2) but the schedule for the changes is chosen by the user. We explore properties and algorithms for the three problems from the user's perspective. Solutions of simple form are obtained for the first two models and an efficient dynamic programming (DP) procedure is proposed for the last. A numerical comparison of the total expected leasing costs suggests that under certain demand patterns, contract forms (2) and (3) could be cost effective. (C) 2001 Elsevier Science B.V. All rights reserved.
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