2013-12-31
Approximate Order-up-to Policies for Inventory Systems with Binomial Yield
Publication
Publication
This paper studies an inventory policy for a retailer who orders his products from a supplier whose deliveries only partially satisfy the quality require- ments. We model this situation by an infinite-horizon periodic-review model with binomial random yield and positive lead time. We propose an order- up-to policy based on approximating the inventory model with unreliable supplier by a model with a reliable supplier and suitably modified demand distribution. The performance of the order-up-to policy is verified by com- paring it with both the optimal policy and the safety stock policy proposed in Inderfurth & Vogelgesang (2013). Further, we extend our approximation to a dual-sourcing model with two suppliers: the first slow and unreliable, and the other fast and fully reliable. Compared to the dual-index order- up-to policy for the model with full information on the yield, the proposed approximation gives promising results.
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| Erasmus Research Institute of Management | |
| hdl.handle.net/1765/50255 | |
| ERIM Report Series Research in Management | |
| Organisation | Erasmus Research Institute of Management |
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Ju, W., Gabor, A., & van Ommeren, J.-K. (2013). Approximate Order-up-to Policies for Inventory Systems with Binomial Yield (No. ERS-2013-017-LIS). ERIM Report Series Research in Management. Retrieved from http://hdl.handle.net/1765/50255 |
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