Heuristic Approach to Inventory Control with Advance Capacity Information

Jakšič Marko and Rusjan Borut
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Jakšič Marko: Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia, Kardeljeva ploščad 17, Ljubljana School of Industrial Engineering, Eindhoven University of Technology, The Netherlands
Rusjan Borut: Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia, Kardeljeva ploščad 17, Ljubljana

Organizacija, 2009, vol. 42, issue 4, 129-136

Abstract: There is a growing trend of information sharing within modern supply chains. This trend is mainly stimulated by recent developments in information technology and the increasing awareness that accurate and timely information helps firms cope with volatile and uncertain business conditions. We model a periodic-review, single-item, capacitated stochastic inventory system, where a supply chain member has the ability to obtain advance capacity information (‘ACI’) about future supply capacity availability. ACI is used to reduce the uncertainty of future supply and thus enables the decision-maker to make better ordering decisions. We develop an easily applicable heuristic based on insights gained from an analysis of the optimal policy. In a numerical study we quantify the benefits of ACI and compare the performance of the proposed heuristic with the optimal performance. We illustrate the conditions in which the procedure is working well and comment on its practical applicability.

Keywords: Operational research; inventory; stochastic models; advance capacity information; heuristic; Operational research; inventory; stochastic models; advance capacity information; heuristic (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:organi:v:42:y:2009:i:4:p:129-136:n:3

DOI: 10.2478/v10051-009-0010-5

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