Continuous-Review (<i>R, nQ</i>) Policies for Inventory Systems with Dual Delivery Modes

Zhou, Sean X.; Yang, Chaolin

doi:10.1287/opre.2016.1538

Cited by 19 publications

(16 citation statements)

References 30 publications

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“…Moreover, because of the capacity constraint, the asymptotic optimality of a TBS policy does not necessarily hold. Moinzadeh and Nahmias (1988), Moinzadeh and Schmidt (1991), Zhou and Yang (2016), and Song et al ( 2017) study a continuous review setting for the problem. For more details and information about recent studies, readers are referred to Svoboda et al (2021).…”

Section: Literature Reviewmentioning

confidence: 99%

Multi-index base-stock policy for inventory systems with multiple capacitated suppliers

Yang

Huang

2021

OR Spectrum

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We study a periodic-review inventory system with multiple capacitated suppliers. These suppliers have different lead times and unit costs, and suppliers with shorter lead times charge higher unit costs. As the optimal ordering policy is unknown and expected to be complicated, we propose a multi-index base-stock (MIBS) policy for the system based on n tailored inventory positions. Orders are placed with each supplier according to a modified base-stock policy. We analyze the policy's system dynamics and establish separability properties of the optimal policy parameters. We also provide a simulation-based optimization procedure for the policy. Because the procedure involves an exhaustive search across n − 1 parameters, we construct a heuristic for computing near-optimal policy parameters. We numerically demonstrate the performance of the MIBS policy and the effectiveness of the heuristic. The results show that the performance of the MIBS policy is very close to that of the dynamic programming policy and that the performance of the heuristic is close to the optimal MIBS policy, with much faster computation. We also explore the performance of the MIBS policy when the number of sources is increased and find that increasing the number of sources means decreasing the average cost, while the marginal returns of adding a supplier diminish. Importantly, given sufficient capacity, by carefully selecting two of the suppliers-often the fastest and the slowest-it is possible to achieve an adequate balance between cost efficiency and responsiveness.

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Section: Literature Reviewmentioning

confidence: 99%

Multi-index base-stock policy for inventory systems with multiple capacitated suppliers

Yang

Huang

2021

OR Spectrum

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“…In Sect. 2.1, we review the dual sourcing literature where we focus on selected papers and refer to Minner (2003) and Zhou and Yang (2016) for a more extensive discussion. In Sect.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Therefore, they construct a queueing network with overflow bypass. Zhou and Yang (2016) introduce a single-index (R,nQ) policy and study a more general setting regarding fixed order costs, batch ordering, and compound Poisson demand. Axsäter (2007) proposes a decision rule for placing expedited orders.…”

Section: Dual Sourcingmentioning

confidence: 99%

Improving effectiveness of spare parts supply by additive manufacturing as dual sourcing option

et al. 2020

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The low-volume spare parts business is often identified as a potential beneficiary of additive manufacturing (AM) technologies. Currently, high AM unit costs or low AM part reliabilities deem the application of AM economical inferior to conventional manufacturing (CM) methods in most cases. In this paper, we investigate the potential to overcome these deficiencies by combining AM and CM methods. For that purpose, we develop an approach that is tailored toward the unique characteristics of dual sourcing with two production methods. Opposed to the traditional dual sourcing literature, we consider the different failure behavior of parts produced by AM and CM methods. Using numerical experiments and a case study in the aviation industry, we explore under which conditions dual sourcing with AM performs best. Single sourcing with AM methods typically leads to higher purchasing and maintenance costs while single sourcing with CM methods increases backorder and holding costs. Savings of more than 30% compared to the best single sourcing option are possible even if the reliability or unit costs of a part sourced with AM are three times worse than for a CM part. In conclusion, dual sourcing methods may play an important role to exploit the benefits of AM methods while avoiding its drawbacks in the low-volume spare parts business.

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“…Xin and Goldberg (2017) prove that the TBS policy is asymptotically optimal as the lead time difference grows large. Zhou and Yang (2016) study the steady state behavior and optimization procedure of a single-index (R, nQ) policy. By modeling the dual sourcing systems as a two-stage tandem queue, Song et al (2017) characterize the optimal policies for a dual sourcing system with endogenous stochastic lead times under a certain condition and propose near-optimal heuristic policies when the condition fails.…”

Section: Dual Sourcing Inventory Managementmentioning

confidence: 99%

Robust Dual Sourcing Inventory Management: Optimality of Capped Dual Index Policies and Smoothing

Sun

Mieghem

2019

M&SOM

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How to dynamically replenish inventory from two supply sources or shipping modes with general lead times. The fast source is more expensive than the slow source. (2) Academic/Practical Relevance: Dual sourcing provides supply chain flexibility to mitigate demand and supply risk. Despite its relevance in practice, characterizing the optimal dual sourcing policy is extremely challenging, and the optimal stochastic policy for non-consecutive lead times has been unknown for over 50 years. (3) Methodology: We present and solve a robust rolling horizon model for periodically reviewed dual sourcing inventory systems that minimizes the total cost of purchasing, inventory holding and backlogging. (4) Results: We prove that the optimal robust policy is a dual index, dual base-stock policy that constrains or "caps" the slow order and provide closed-form expressions for the three control parameters. The optimality result is established for general lead times and can accommodate non-stationary demand. Our numerical study shows that as the lead time difference grows, the capped dual index policy increasingly smooths slow orders and, for stationary demand, converges to the tailored base surge policy, which places a constant slow order and has been shown to be asymptotically optimal. (5) Managerial Implications: Our capped dual index policy is easy to understand, explain and implement in practice. In an extensive simulation study, the capped dual index policy performs as well as, and can even outperform, the best heuristics presented in the stochastic inventory literature.

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Continuous-Review (R, nQ) Policies for Inventory Systems with Dual Delivery Modes

Cited by 19 publications

References 30 publications

Multi-index base-stock policy for inventory systems with multiple capacitated suppliers

Multi-index base-stock policy for inventory systems with multiple capacitated suppliers

Improving effectiveness of spare parts supply by additive manufacturing as dual sourcing option

Robust Dual Sourcing Inventory Management: Optimality of Capped Dual Index Policies and Smoothing

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