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

Kamran Moinzadeh and Steven Nahmias
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Kamran Moinzadeh: Department of Management Science, University of Washington, Seattle, Washington 98195
Steven Nahmias: Leavey School of Business, Santa Clara University, Santa Clara, California 95053

Management Science, 1988, vol. 34, issue 6, 761-773

Abstract: 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.

Keywords: inventory production; operating characteristics; leadtime policy; ordering policy; stochastic models (search for similar items in EconPapers)
Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:34:y:1988:i:6:p:761-773

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