Dual Sourcing in a Serial System

We consider a finite-horizon, periodic-review model for a serial system with two uncapacitated external suppliers. While one external supplier (regular supplier) ships to the most upstream stage, the other one (emergency supplier) ships directly to a downstream stage. For this system, with general lead-times we show that the optimal cost function is multimodular with respect to inventories in transit and inventories at different stages and obtain results that show how the optimal order quantities change with respect to these inventories. Our analysis also leads to sufficient conditions under which modified echelon-basestock-type policies are optimal. This article is protected by copyright. All rights reserved.

[1]  Awi Federgruen,et al.  Computational Issues in an Infinite-Horizon, Multiechelon Inventory Model , 1984, Oper. Res..

[2]  John A. Muckstadt,et al.  A Decomposition Approach for a Class of Capacitated Serial Systems , 2009, Oper. Res..

[3]  Roman Kapuscinski,et al.  Optimal Policies for a Capacitated Two-Echelon Inventory System , 2004, Oper. Res..

[4]  A. Federgruen.  Chapter 3 Centralized planning models for multi-echelon inventory systems under uncertainty , 1993, Logistics of Production and Inventory.

[5]  Patrik Alfredsson,et al.  Modeling emergency supply flexibility in a two-echelon inventory system , 1999 .

[6]  Evan L. Porteus,et al.  Multistage Inventory Management with Expediting , 2000, Oper. Res..

[7]  E. W. Barankin,et al.  A DELIVERY-LAG INVENTORY MODEL WITH AN EMERGENCY PROVISION , 1961 .

[8]  S. Nahmias,et al.  A continuous review model for an inventory system with two supply modes , 1988 .

[9]  John N. Tsitsiklis,et al.  A Single-Unit Decomposition Approach to Multiechelon Inventory Systems , 2008, Oper. Res..

[10]  John N. Tsitsiklis,et al.  Dynamic Leadtime Management in Supply Chains , 2003 .

[11]  Paul H. Zipkin.  On the Structure of Lost-Sales Inventory Models , 2008, Oper. Res..

[12]  Gregory A. DeCroix.  Optimal Policy for a Multiechelon Inventory System with Remanufacturing , 2006, Oper. Res..

[13]  Suresh P. Sethi,et al.  Are Base-Stock Policies Optimal in Inventory Problems with Multiple Delivery Modes? , 2006, Oper. Res..

[14]  Diego Klabjan,et al.  Optimal Expediting Policies for a Serial Inventory System with Stochastic Lead Time and Visibility of Orders in Transit , 2015 .

[15]  Jing-Sheng Song,et al.  Inventories with Multiple Supply Sources and Networks of Queues with Overflow Bypasses , 2009, Manag. Sci..

[16]  Gad Allon,et al.  Global Dual Sourcing: Tailored Base-Surge Allocation to Near- and Offshore Production , 2010, Manag. Sci..

[17]  David Simchi-Levi,et al.  Optimal Policy for Expediting Orders in Transit , 2009 .

[18]  Qing Li,et al.  Multimodularity and Its Applications in Three Stochastic Dynamic Inventory Problems , 2014, Manuf. Serv. Oper. Manag..

[19]  Kaj Rosling,et al.  Optimal Inventory Policies for Assembly Systems Under Random Demands , 1989, Oper. Res..

[20]  Woonghee Tim Huh,et al.  On the Optimal Policy Structure in Serial Inventory Systems with Lost Sales , 2010, Oper. Res..

[21]  Yoichiro Fukuda.  Optimal Policies for the Inventory Problem with Negotiable Leadtime , 1964 .

[22]  Alan Scheller-Wolf,et al.  Now or Later: A Simple Policy for Effective Dual Sourcing in Capacitated Systems , 2008, Oper. Res..

[23]  A. Whittemore,et al.  Optimal Inventory Under Stochastic Demand with Two Supply Options , 1977 .

[24]  Sridhar Seshadri,et al.  New Policies for the Stochastic Inventory Control Problem with Two Supply Sources , 2010, Oper. Res..

[25]  Xiuli Chao,et al.  Dynamic pricing and inventory management with regular and expedited supplies , 2014 .