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

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 fo...

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Bibliographic Details
Published in:Management science 1988-06, Vol.34 (6), p.761-773
Main Authors: Moinzadeh, Kamran, Nahmias, Steven
Format: Article
Language:English
Subjects:
Applied sciences
Average cost
Average cost functions
Cost functions
Economic costs
Economic models
Exact sciences and technology
Inventories
Inventory control, production control. Distribution
inventory production
leadtime policy
Modeling
operating characteristics
Operational research and scientific management
Operational research. Management science
Optimal policy
ordering policy
stochastic models
Supply
Unit costs
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Summary: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.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.34.6.761