Optimal control policies for a periodic review inventory system with emergency orders

Chi Chiang*, Genaro J. Gutierrez

*Corresponding author for this work

Research output: Contribution to journalReview article

52 Scopus citations

Abstract

We describe a periodic review inventory system where emergency orders, which have a shorter supply lead time but are subject to higher ordering cost compared to regular orders, can be placed on a continuous basis. We consider the periodic review system in which the order cycles are relatively long so that they are possibly larger than the supply lead times. Study of such systems is important since they are often found in practice. We assume that the difference between the regular and emergency supply lead times is less than the order-cycle length. We develop a dynamic programming model and derive a stopping rule to end the computation and obtain optimal operation parameters. Computational results are included that support the contention that easily implemented policies can be computed with reasonable effort.

Original languageEnglish
Pages (from-to)187-204
Number of pages18
JournalNaval Research Logistics
Volume45
Issue number2
DOIs
StatePublished - 1 Jan 1998

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