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Optimal control policies for a periodic review inventory system with emergency orders

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  • Chi Chiang
  • Genaro J. Gutierrez

Abstract

We describe a periodic review inventory system where emergency orders, which have a shorter supply lead time but are subject to higher ordering cost compared to regular orders, can be placed on a continuous basis. We consider the periodic review system in which the order cycles are relatively long so that they are possibly larger than the supply lead times. Study of such systems is important since they are often found in practice. We assume that the difference between the regular and emergency supply lead times is less than the order‐cycle length. We develop a dynamic programming model and derive a stopping rule to end the computation and obtain optimal operation parameters. Computational results are included that support the contention that easily implemented policies can be computed with reasonable effort. © 1998 John Wiley & Sons, Inc. Naval Research Logistics 45: 187–204, 1998

Suggested Citation

  • Chi Chiang & Genaro J. Gutierrez, 1998. "Optimal control policies for a periodic review inventory system with emergency orders," Naval Research Logistics (NRL), John Wiley & Sons, vol. 45(2), pages 187-204, March.
    • Handle: RePEc:wly:navres:v:45:y:1998:i:2:p:187-204
    DOI: 10.1002/(SICI)1520-6750(199803)45:23.0.CO;2-4
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    References listed on IDEAS

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    1. Yoichiro Fukuda, 1964. "Optimal Policies for the Inventory Problem with Negotiable Leadtime," Management Science, INFORMS, vol. 10(4), pages 690-708, July.
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    Cited by:

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    3. Jian Yang & Xiangtong Qi & Yusen Xia, 2005. "A Production-Inventory System with Markovian Capacity and Outsourcing Option," Operations Research, INFORMS, vol. 53(2), pages 328-349, April.
    4. Johansen, Søren Glud, 2019. "Emergency orders in the periodic-review inventory system with fixed ordering costs and stochastic lead times for normal orders," International Journal of Production Economics, Elsevier, vol. 209(C), pages 205-214.
    5. Tomoaki Yamazaki & Keisuke Shida & Takashi Kanazawa, 2016. "An approach to establishing a method for calculating inventory," International Journal of Production Research, Taylor & Francis Journals, vol. 54(8), pages 2320-2331, April.
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    7. Bram Westerweel & Rob Basten & Jelmar den Boer & Geert‐Jan van Houtum, 2021. "Printing Spare Parts at Remote Locations: Fulfilling the Promise of Additive Manufacturing," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1615-1632, June.
    8. Li, Xiang & Li, Yongjian & Cai, Xiaoqiang, 2011. "On a multi-period supply chain system with supplementary order opportunity," European Journal of Operational Research, Elsevier, vol. 209(3), pages 273-284, March.

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