EOQ Models with Supply Disruptions

Most of the early research in inventory theory concentrates purely on demand uncertainty. However, models which aim to capture the dynamics of real-world systems must also take uncertainties in the supply side into consideration. One type of supply uncertainty that has attracted considerable attention during the past decade is supply disruptions, such as those that arise as a result of customs delays, labor strikes, and natural disasters. Over the past several years, companies have developed many strategies to mitigate the effects of such disruptions. One strategy is to hold more inventory with the additional amount serving as a buffer against disruptions. Since it is among the most basic inventory models, the EOQ model features prominently in the earliest work on disruptions, as well as many subsequent models. This chapter summarizes the studies on EOQ models with supply disruptions.