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A periodic review inventory model with two delivery modes, fractional lead-times, and age-and-period-dependent backlogging costs

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  • Chand, Suresh
  • Li, Jian
  • Xu, Yanyi

Abstract

We examine a periodic review inventory model where the buyer has access to a mix of two delivery modes for the quantity it orders in a period; these include an emergency delivery mode that delivers instantaneously and a regular delivery mode that delivers within the length of the review period. The unmet demand is backordered and charged a backlogging cost that varies with the length of the backlogging time. The excess inventory is charged a holding cost. The unit costs for the delivery modes could be different. We show that the well-known base-stock policy structure remains optimal for this problem under mild conditions.

Suggested Citation

  • Chand, Suresh & Li, Jian & Xu, Yanyi, 2016. "A periodic review inventory model with two delivery modes, fractional lead-times, and age-and-period-dependent backlogging costs," International Journal of Production Economics, Elsevier, vol. 173(C), pages 199-206.
    • Handle: RePEc:eee:proeco:v:173:y:2016:i:c:p:199-206
    DOI: 10.1016/j.ijpe.2015.12.002
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