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Dual Sourcing Policy for a Continuous-Review Stochastic Inventory System.
- Source :
-
IEEE Transactions on Automatic Control . Jul2019, Vol. 64 Issue 7, p2921-2928. 8p. - Publication Year :
- 2019
-
Abstract
- We study a continuous-review inventory system with dual sourcing modes and Brownian motion demand. The regular order is from one supplier at some constant rate with a low unit cost while the expedite order is from the other one with a fixed setup cost and an expensive unit cost. With usual holding/shortage cost, the system's objective is to choose a regular constant order rate and an expedite replenishment policy such that the long-run average cost is minimized. We show that the regular ordering rate must be strictly less than the expected demand rate and an optimal expedite ordering policy is the well-known $(s, S)$ policy. In particular, based on the theoretical analysis, we give a computational algorithm to demonstrate how to find the optimal regular ordering rate $\lambda ^*$ and expedite policy parameters $s^*$ and $S^*$. Finally, using the algorithm, we investigate the effects of system's parameters on the optimal policy parameters and value of dual sourcing by numerical studies. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00189286
- Volume :
- 64
- Issue :
- 7
- Database :
- Academic Search Index
- Journal :
- IEEE Transactions on Automatic Control
- Publication Type :
- Periodical
- Accession number :
- 137234544
- Full Text :
- https://doi.org/10.1109/TAC.2018.2872205