An order-expediting inventory model with supplier's production lead-time

Expedited shipments are often seen in practice. When the inventory level of an item gets dangerously low after an order has been placed, material managers are often willing to expedite the order at extra costs. In this paper, we propose an order-expediting continuous review inventory model. Besides the two usual operational parameters: Reorder point s and order quantity Q, it consists of a third parameter called the expedite-up-to level R. If inventory falls below R at the end of the production lead-time, the buyer can request the supplier to deliver part of an outstanding order via a fast transportation mode. The amount expedited will raise inventory to R, while the remaining order is delivered via a slow (regular) transportation mode. Simple procedures are developed to obtain optimal or near-optimal solutions. Computational results show that the proposed model is attractive and worthwhile to use if service level is high, the fixed cost of expediting is negligible, or the production lead-time is long.