Periodic review inventory models with stochastic supplier's visit intervals

Chi Chiang*

*Corresponding author for this work

Research output: Contribution to journalArticle

19 Scopus citations

Abstract

Periodic review inventory models are widely used in practice, especially for inventory systems in which many different items are purchased from the same supplier. However, all periodic review models have assumed a fixed length of the review periods. In practice, it is possible that the review periods are of a variable length. Such periodic systems result mainly from supply uncertainties. For example, the supplier visits the downstream retailers and replenishes inventories for them, but does not always come in constant intervals. This may be because retailers are geographically dispersed in the supply chain, the supplier is in a relatively more powerful position, or the supplier simply does not have a reliable visit schedule. In such situations, the replenishment cycle length is random in nature. In this paper, we use dynamic programming to model such institutional contexts. We assume that the supplier's visit intervals are independently and identically distributed. With a suitable transformation, the back-logged periodic review model derived becomes a standard discrete-time model. The computation shows that ignoring the variability of the supplier's visit intervals can incur extremely large losses, especially if shortage is costly, demand variability is low, and/or the replenishment lead-time is short.

Original languageEnglish
Pages (from-to)433-438
Number of pages6
JournalInternational Journal of Production Economics
Volume115
Issue number2
DOIs
StatePublished - 1 Jan 2008

Keywords

  • Dynamic programming
  • Inventory model
  • Lost-sales
  • Periodic review
  • Supply chain

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