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A Continuous Review Model for an Inventory System with Two Supply Modes

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Author Info

  • Kamran Moinzadeh

    (Department of Management Science, University of Washington, Seattle, Washington 98195)

  • Steven Nahmias

    (Leavey School of Business, Santa Clara University, Santa Clara, California 95053)

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    Abstract

    In this paper we develop an approximate model of an inventory control system in which there exist two options for resupply, with one having a shorter lead time. Because the optimal policy appears to be extremely complex, we consider a reasonable extension of the standard (Q, R) policy to allow for two different lot sizes Q 1 and Q 2, and two different reorder levels, R 1 and R 2. Expressions for the expected on hand inventory and the expected backorders are developed and a procedure for determining the policy parameters is given. The model is validated by simulation, and calculations are included which compare the average annual cost with and without emergency ordering.

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    File URL: http://dx.doi.org/10.1287/mnsc.34.6.761
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 34 (1988)
    Issue (Month): 6 (June)
    Pages: 761-773

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    Handle: RePEc:inm:ormnsc:v:34:y:1988:i:6:p:761-773

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    Related research

    Keywords: inventory production; operating characteristics; leadtime policy; ordering policy; stochastic models;

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    Cited by:
    1. Ochtman, G. & Dekker, R. & van Asperen, E. & Kusters, W., 2004. "Floating stocks in FMCG supply chains," Econometric Institute Research Papers EI 2004-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. Hajji, Adnene & Gharbi, Ali & Kenne, Jean-Pierre & Pellerin, Robert, 2011. "Production control and replenishment strategy with multiple suppliers," European Journal of Operational Research, Elsevier, vol. 208(1), pages 67-74, January.
    3. Duran, Alfonso & Gutierrez, Gil & Zequeira, Romulo I., 2004. "A continuous review inventory model with order expediting," International Journal of Production Economics, Elsevier, vol. 87(2), pages 157-169, January.
    4. Langenberg, Kerstin U. & Seifert, Ralf W. & Tancrez, Jean-S├ębastien, 2012. "Aligning supply chain portfolios with product portfolios," International Journal of Production Economics, Elsevier, vol. 135(1), pages 500-513.
    5. Ng, C. T. & Li, Leon Y. O. & Chakhlevitch, K., 2001. "Coordinated replenishments with alternative supply sources in two-level supply chains," International Journal of Production Economics, Elsevier, vol. 73(3), pages 227-240, October.
    6. Fleischmann, M. & van Nunen, J.A.E.E. & Graeve, B., 2002. "Integrating Closed-loop Supply Chains and Spare Parts Management at IBM," ERIM Report Series Research in Management ERS-2002-107-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    7. Vlachos, Dimitrios & Tagaras, George, 2001. "An inventory system with two supply modes and capacity constraints," International Journal of Production Economics, Elsevier, vol. 72(1), pages 41-58, June.
    8. Tang, Christopher S., 2006. "Perspectives in supply chain risk management," International Journal of Production Economics, Elsevier, vol. 103(2), pages 451-488, October.
    9. Mahadevan, B. & Pyke, David F. & Fleischmann, Moritz, 2003. "Periodic review, push inventory policies for remanufacturing," European Journal of Operational Research, Elsevier, vol. 151(3), pages 536-551, December.
    10. Fleischmann, Moritz & Kuik, Roelof, 2003. "On optimal inventory control with independent stochastic item returns," European Journal of Operational Research, Elsevier, vol. 151(1), pages 25-37, November.
    11. Mohebbi, Esmail & Posner, Morton J. M., 1999. "A lost-sales continuous-review inventory system with emergency ordering," International Journal of Production Economics, Elsevier, vol. 58(1), pages 93-112, January.
    12. Shibuya, Takeshi & Dohi, Tadashi & Osaki, Shunji, 1998. "Optimal continuous review policies for spare part provisioning with random lead times," International Journal of Production Economics, Elsevier, vol. 55(3), pages 257-271, August.
    13. Xu, Ningxiong, 2008. "Myopic policy for a two-product and multi-period supply contract with different delivery lead times and storage limitation," International Journal of Production Economics, Elsevier, vol. 115(1), pages 179-188, September.
    14. Zhang, Ju-liang & Zhang, Ming-yu, 2011. "Supplier selection and purchase problem with fixed cost and constrained order quantities under stochastic demand," International Journal of Production Economics, Elsevier, vol. 129(1), pages 1-7, January.
    15. Das, Rubel & Hanaoka, Shinya, 2014. "Relief inventory modelling with stochastic lead-time and demand," European Journal of Operational Research, Elsevier, vol. 235(3), pages 616-623.
    16. Gallego, Guillermo & Jin, Yue & Muriel, Ana & Zhang, Ge & Yildiz, V. Taylan, 2007. "Optimal ordering policies with convertible lead times," European Journal of Operational Research, Elsevier, vol. 176(2), pages 892-910, January.
    17. Chiang, Chi & Gutierrez, Genaro J., 1996. "A periodic review inventory system with two supply modes," European Journal of Operational Research, Elsevier, vol. 94(3), pages 527-547, November.
    18. Axsater, Sven, 2007. "A heuristic for triggering emergency orders in an inventory system," European Journal of Operational Research, Elsevier, vol. 176(2), pages 880-891, January.
    19. Martinez de Albeniz, Victor, 2007. "Pricing in a duopoly with a lead time advantage," IESE Research Papers D/720, IESE Business School.
    20. Chiang, Chi, 2003. "Optimal replenishment for a periodic review inventory system with two supply modes," European Journal of Operational Research, Elsevier, vol. 149(1), pages 229-244, August.

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