Innovative Logistics Management under Uncertainty using Markov Model

Abstract

This paper proposes an innovative uncertainty management using a stochastic model to formulate logistics network starting from order processing, purchasing, inventory management, transportation, and reverse logistics activities. As this activity chain fits well with Markov process, we exploit the very principle to represent not only the transition among various activities, but also the inherent uncertainty that has plagued logistics activities across the board. The logistics network model is thus designed to support logistics management by retrieving and analyzing logistics performance in a timely and cost effective manner. The application of information technology entails this network to become a Markovian information model that is stochastically predictable and flexibly manageable. A case study is presented to highlight the significance of the model.

Keywords: Logistics network; Markov process; Risk management; Uncertainty management.