TY - JOUR
T1 - The (Q,r) inventory system with an unreliable supplier
AU - Gupta, Diwakar
N1 - Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 1996/5
Y1 - 1996/5
N2 - This paper examines the impact on operating costs of having an unreliable supplier in a continuous review, fixed order quantity (Q) - reorder point (r) inventory system. We assume Poisson demand and exponentially distributed lengths of the supplier's on and off periods. On (off) periods represent time lengths during which the supplier is able (unable) to fill new orders. Any unsatisfied demand is assumed to be lost. We analyze two situations. The first has a negligible lead time but allows the number of outstanding orders, each of a fixed size Q, to be arbitrary. The second situation, on the other hand, has a constant lead time but there the number of outstanding orders is restricted to at most one. In each case, exact expressions necessary to find the average cost minimizing (Q,r) pair are developed and several numerical examples are solved. Computational results show the cost function to be well behaved and suggest that ignoring supply uncertainty or approximate modeling can be relatively very expensive, especially when the off periods are long or shortage penalty is high or both. We also identify regions where the average operating cost associated with the computationally simpler approximate solution is not far from its optimum value.
AB - This paper examines the impact on operating costs of having an unreliable supplier in a continuous review, fixed order quantity (Q) - reorder point (r) inventory system. We assume Poisson demand and exponentially distributed lengths of the supplier's on and off periods. On (off) periods represent time lengths during which the supplier is able (unable) to fill new orders. Any unsatisfied demand is assumed to be lost. We analyze two situations. The first has a negligible lead time but allows the number of outstanding orders, each of a fixed size Q, to be arbitrary. The second situation, on the other hand, has a constant lead time but there the number of outstanding orders is restricted to at most one. In each case, exact expressions necessary to find the average cost minimizing (Q,r) pair are developed and several numerical examples are solved. Computational results show the cost function to be well behaved and suggest that ignoring supply uncertainty or approximate modeling can be relatively very expensive, especially when the off periods are long or shortage penalty is high or both. We also identify regions where the average operating cost associated with the computationally simpler approximate solution is not far from its optimum value.
KW - Approximations
KW - Fixed Order Quantity
KW - Inventory-Production: Stochastic
KW - Reorder Point
KW - Unreliable Supplier
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U2 - 10.1080/03155986.1996.11732293
DO - 10.1080/03155986.1996.11732293
M3 - Article
AN - SCOPUS:0038549131
SN - 0315-5986
VL - 34
SP - 59
EP - 76
JO - INFOR: Information Systems and Operational Research
JF - INFOR: Information Systems and Operational Research
IS - 2
ER -