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

  • 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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    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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    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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