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

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. (c) 2004 Elsevier Ltd. All rights reserved.