A (Q,R) inventory replenishment model with two delivery modes

Cinthia Pérez and Joseph Geunes

European Journal of Operational Research, 2014, vol. 237, issue 2, 528-545

Abstract: Although splitting shipments across multiple delivery modes typically increases total shipping costs as a result of diseconomies of scale, it may offer certain benefits that can more than offset these costs. These benefits include a reduction in the probability of stockout and in the average inventory costs. We consider a single-stage inventory replenishment model that includes two delivery modes: a cheaper, less reliable mode, and another, more expensive but perfectly reliable mode. The high-reliability mode is only utilized in replenishment intervals in which the lead time of the less-reliable mode exceeds a certain value. This permits substituting the high-reliability mode for safety stock, to some degree. We characterize optimal replenishment decisions with these two modes, as well as the potential benefits of simultaneously using two delivery modes.

Keywords: Inventory planning and control; Supply chain management; Lead time management; Inventory theory (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:237:y:2014:i:2:p:528-545

DOI: 10.1016/j.ejor.2014.02.049

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