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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Kamran Moinzadeh & Steven Nahmias, 1988. "A Continuous Review Model for an Inventory System with Two Supply Modes," Management Science, INFORMS, vol. 34(6), pages 761-773, June.
  • Handle: RePEc:inm:ormnsc:v:34:y:1988:i:6:p:761-773
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    File URL: http://dx.doi.org/10.1287/mnsc.34.6.761
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