A PERIODIC-REVIEW INVENTORY SYSTEM WITH SUPPLY INTERRUPTIONS

Zhaolin Li · Susan H. Xu · Jack C. Hayya

44 citations0/0 files storedProbability in the Engineering and Informational Sciences

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Supply Chain and Inventory Management Reliability and Maintenance Optimization Sustainable Supply Chain Management

Abstract

Supply interruptions resulting from unpredictable events, such as machine breakdowns, order cancellations, unscheduled maintenance, and labor strikes can produce adverse effects on the production/inventory system. In this article, we consider a periodic-review inventory system subject to random demand and unreliable supply. The availability of supply is modeled as an alternating renewal process with general distributions for the durations of the UP and DOWN cycles. We consider the lost-sales case and also discuss the backorder case, for both the discounted and long-run average cost criteria. For the linear cost model, we derive the structural properties and bounds of the optimal policy. We also propose the “end-of-cycle” inventory return contract and show that it may be mutually beneficial to both the firm and the supplier.

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References

1999Inventory management and production planning and scheduling 1989Stochastic Modeling and the Theory of Queues 1995Lot Sizing with Random Yields: A Review 1999Modeling Supply Chain Contracts: A Review 1990The Structure of Periodic Review Policies in the Presence of Random Yield 1994A Periodic Review, Production Planning Model with Uncertain Capacity and Uncertain Demand—Optimality of Extended Myopic Policies 1966The Status of Mathematical Inventory Theory 1996Inventory Control with Information About Supply Conditions

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