Safety stock reduction by order splitting

Péter Kelle and Edward A. Silver

Naval Research Logistics (NRL), 1990, vol. 37, issue 5, 725-743

Abstract: In this article we consider an item for which a continuous review, reorder point, order quantity inventory control system is used. The amount of safety stock required depends upon, among other factors, the average value and variability of the length of the replenishment lead time. One way to reduce these quantities is to split orders among two or more vendors. In this article the random lead times are assumed to have Weibull distributions. This permits the development of analytic expressions for the reduction in the expected value and variability of total demand until the critical first (earliest) delivery received from a vendor. An expression is also obtained for the reorder point that provides a given probability of no stockout prior to the first delivery. Lower bounds are given on the order quantity so as to ensure that the probability of a stockout before any one of the later (second, third, etc.) deliveries is sufficiently small to be considered negligible. The analytic and tabular results can be used to estimate the benefits (reduced carrying costs and/or increased service level) of order splitting.

Date: 1990
References: View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1002/1520-6750(199010)37:53.0.CO;2-O

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:37:y:1990:i:5:p:725-743

Access Statistics for this article

More articles in Naval Research Logistics (NRL) from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().