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An Information Based Multiechelon Inventory System with Emergency Orders

Author

Listed:
  • Kamran Moinzadeh

    (University of Washington, Seattle, Washington)

  • Prabhu K. Aggarwal

    (The College of William and Mary, Williamsburg, Virginia)

Abstract

In this paper we study a (S-1, S) type multiechelon inventory system where all the stocking locations have the option to replenish their inventory through either a normal or a more expensive emergency resupply channel. When ordering a unit, each stocking location decides which channel to use based on its inventory level and the remaining leadtimes of the its outstanding orders. We consider the implications of this policy by developing expressions for the operating characteristics of the system and describing a procedure for finding the optimal policy parameters. A numerical study presented in the paper indicates that when alternative resupply modes are available our policy, which incorporates the information on the remaining leadtimes of the outstanding orders in selecting the resupply mode, can result in considerable cost savings when compared to policies which allow a single resupply mode.

Suggested Citation

  • Kamran Moinzadeh & Prabhu K. Aggarwal, 1997. "An Information Based Multiechelon Inventory System with Emergency Orders," Operations Research, INFORMS, vol. 45(5), pages 694-701, October.
    • Handle: RePEc:inm:oropre:v:45:y:1997:i:5:p:694-701
    DOI: 10.1287/opre.45.5.694
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    Cited by:

    1. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    2. Kouki, Chaaben & Babai, M. Zied & Minner, Stefan, 2018. "On the benefit of dual-sourcing in managing perishable inventory," International Journal of Production Economics, Elsevier, vol. 204(C), pages 1-17.
    3. Kathryn E. Caggiano & John A. Muckstadt & James A. Rappold, 2006. "Integrated Real-Time Capacity and Inventory Allocation for Reparable Service Parts in a Two-Echelon Supply System," Manufacturing & Service Operations Management, INFORMS, vol. 8(3), pages 292-319, August.
    4. Jovan Grahovac & Amiya Chakravarty, 2001. "Sharing and Lateral Transshipment of Inventory in a Supply Chain with Expensive Low-Demand Items," Management Science, INFORMS, vol. 47(4), pages 579-594, April.
    5. Fredrik Olsson, 2019. "Simple modeling techniques for base-stock inventory systems with state dependent demand rates," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 90(1), pages 61-76, August.
    6. Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
    7. John A. Buzacott & Rachel Q. Zhang, 2004. "Inventory Management with Asset-Based Financing," Management Science, INFORMS, vol. 50(9), pages 1274-1292, September.
    8. 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.
    9. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    10. Johansson, Lina & Olsson, Fredrik, 2018. "Age-based inventory control in a multi-echelon system with emergency replenishments," European Journal of Operational Research, Elsevier, vol. 265(3), pages 951-961.
    11. Tong Wang & Xiaoyue Yan & Chaolin Yang, 2021. "Managing a Hybrid RDC‐DC Inventory System," Production and Operations Management, Production and Operations Management Society, vol. 30(10), pages 3679-3697, October.
    12. Lina Johansson & Fredrik Olsson, 2017. "Quantifying sustainable control of inventory systems with non-linear backorder costs," Annals of Operations Research, Springer, vol. 259(1), pages 217-239, December.

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