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Emergency orders in the periodic-review inventory system with fixed ordering costs and stochastic lead times for normal orders

Søren Glud Johansen

International Journal of Production Economics, 2019, vol. 209, issue C, 205-214

Abstract: This paper presents various periodic review policies for inventory control of a single item facing compound Poisson demand. Emergency orders are controlled by a reorder point policy with a target stock level, whereas normal orders are issued according to a reorder point policy with a fixed order quantity. We assume that emergency orders have a short constant lead time and are more expensive than normal orders for which the extra lead time is specified as a stochastic multiple of the review period. In addition to variable and fixed costs for emergency orders and fixed costs for normal orders, our model includes linear holding and backlogging costs.

Keywords: Backlogging; Emergency order; Markov decision model; Policy iteration; Reorder-point policy; Stochastic lead times (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:proeco:v:209:y:2019:i:c:p:205-214