A periodic review inventory system with two supply modes

Chiang, Chi; Gutiérrez, Genaro J.

doi:10.1016/0377-2217(95)00151-4

Cited by 65 publications

(25 citation statements)

References 12 publications

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“…Whittemore and Saunders (1977) is the first paper to consider a case in which lead-times of two supply modes may differ by an arbitrary number of review periods. Recent notable variations of periodic review inventory models with two alternative supply sources are analyzed in Chiang and Gutierrez (1996), Tagaras and Vlachos (2001), and Veeraraghavan and Scheller-Wolf (2003). For a detailed survey of this literature, we refer readers to Minner (2003) and Thomas and Tyworth (2006).…”

Section: Literature Reviewmentioning

confidence: 99%

Periodic review inventory management with contingent use of two freight modes with fixed costs

Jain

Groenevelt

Rudi

2011

Naval Research Logistics

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We study a stochastic inventory model of a firm, that sources the product from a make-to-order manufacturer, and can ship orders by a combination of two freight modes. The two freight modes differ in lead-times, and each has a fixed and a quantity proportional cost for each use. The ordering decisions are made periodically; however, the inventory holding and back-order penalty costs are incurred continuously in time. The decision of how to allocate units between the two freight modes utilizes information about demand during the completion of manufacturing. We derive the optimal freight mode allocation policy and show that the optimal ordering policy is not an (s, S) policy in general. We provide bounds for the optimal policy and perform a stationary analysis of the model assuming an (s, S) policy. We show that the best (s, S) policy achieves time average probability of being in-stock equal to the ratio of penalty cost rate and the sum of penalty cost rate and holding cost rate. We carry-out extensive numerical investigations of the properties of the optimal ordering policy and its benefits over the single freight policy, and show that the performance of best (s, S) policy is comparable to the optimal policy in most cases.

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Section: Literature Reviewmentioning

confidence: 99%

Periodic review inventory management with contingent use of two freight modes with fixed costs

Jain

Groenevelt

Rudi

2011

Naval Research Logistics

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“…For a problem with arbitrary lead times, Whittemore and Saunders (1977) found the optimal policy to be of a very complex form. Chiang and Gutierrez (1996) treated a problem where the lead time of the secondary source is a fraction of that of the primary source, which in turn is shorter than the inventory review period. Chiang and Gutierrez (1998) extended the problem to allow the order from the secondary source to be made more frequently.…”

Section: Introductionmentioning

confidence: 99%

A Production-Inventory System with Markovian Capacity and Outsourcing Option

Yang

Xia

2005

Operations Research

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We study the optimal production-inventory-outsourcing policy for a firm with Markovian in-house production capacity that faces independent stochastic demand and has the option to outsource. We find very simple optimal policy forms under fairly reasonable assumptions. In addition, when the capacity Markov process is stochastically monotone, the policy parameters decrease in the firm's current capacity level under additional assumptions. All these results extend to the infinite-horizon and undiscounted-cost cases. We analyze comparative statics and the necessity of some technical conditions, and discuss when the outsourcing option is more valuable.

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“…Whittemore and Saunders (1977) During the period between this early and elementary theoretical work to now, several authors have proposed heuristic policies for this problem (see, for example, Chiang and Gutierrez (1995) and Tagaras and Vlachos (2001)). Please see Veeraraghavan and SchellerWolf (2007) for a discussion of these papers and additional references.…”

Section: Related Literaturementioning

confidence: 99%

New Policies for the Stochastic Inventory Control Problem with Two Supply Sources

Sheopuri

Janakiraman

Seshadri

2010

Operations Research

125

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We study an inventory system under periodic review in the presence of two suppliers (or delivery modes). The emergency supplier has a shorter lead-time than the regular supplier, but the unit price he offers is higher. Excess demand is backlogged. We show that the classical "Lost Sales inventory problem" is a special case of this problem. Then, we generalize the recently studied class of Dual Index policies (Veeraraghavan and Scheller-Wolf (2007)) by proposing two classes of policies. The first class consists of policies that have an orderup-to structure for the emergency supplier. We provide analytical results that are useful for determining optimal or near-optimal policies within this class. This analysis and the policies that we propose leverage the connections we make between our problem and the lost sales problem. The second class consists of policies that have an order-up-to structure for the combined orders of the two suppliers. Here, we derive bounds on the optimal order quantity from the emergency supplier, in any period, and use these bounds for finding effective policies within this class. Finally, we undertake an elaborate computational investigation to compare the performance of the policies we propose with that of Dual Index policies. One of our policies provides an average cost-saving of 1.1 % over the Best Dual Index policy and has the same computational requirements. Another policy that we propose has a cost performance similar to the Best Dual Index policy but its computational requirements are lower.

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A periodic review inventory system with two supply modes

Cited by 65 publications

References 12 publications

Periodic review inventory management with contingent use of two freight modes with fixed costs

Periodic review inventory management with contingent use of two freight modes with fixed costs

A Production-Inventory System with Markovian Capacity and Outsourcing Option

New Policies for the Stochastic Inventory Control Problem with Two Supply Sources

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