Reducing Inventory Costs by Order Splitting in the Sole Sourcing Environment

Chi Chung Chiang · Wen‐Chyuan Chiang

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Supply Chain and Inventory Management Sustainable Supply Chain Management Logistics and Transportation Systems

Abstract

In this paper, we examine the possibility of the arrangement for multiple deliveries in each order cycle for the continuous review inventory system. The problem is mainly found in the retail sector where inventory often makes up the majority of a company's assets. Most works recently have focused on the reduction of safety stock in the multiple sourcing setting. This research, instead, considers the reduction of cycle stock in the sole sourcing environment. The formulation where a predetermined service level serves as a constraint for the objective function is employed throughout this research. We show that splitting the order into multiple deliveries can significantly reduce the inventory carrying cost especially when the interarrival times between deliveries are determined optimally.

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References

1983Production and inventory management 1979Decision Systems for Inventory Management and Production Planning 1968Decision Rules for Inventory Management 1991Sole Versus Dual Sourcing in Stochastic Lead-Time (s, Q) Inventory Models 1975Manufacturing Cycle Time Determination for a Multi-Stage Economic Production Quantity Model 1981Stock Control with Two Suppliers and Normal Lead Times 1990Safety stock reduction by order splitting 1993Optimal ordering policies with two suppliers when lead times and demands are all stochastic

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2002Multiple replenishment orders in a continuous-review inventory system with lost sales 2013A new order splitting model with stochastic lead times for deterioration items 2009An order expediting policy for continuous review systems with manufacturing lead-time 2005Order splitting in single sourcing with scheduled-release orders 2002Ordering policies for inventory systems with expediting 2014

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