A Heuristic for Triggering Emergency Orders in an Inventory System

Summary, in English

This paper considers a single-echelon inventory system with a warehouse facing compound Poisson customer demand. Normally the warehouse replenishes from an outside supplier according to a continuous review reorder point policy. However, it is also possible to use emergency orders. Such orders incur additional costs but have a much shorter lead time. We consider standard holding and backorder costs as well as ordering costs. A heuristic decision rule for triggering emergency orders is suggested. The decision rule minimizes the expected costs under the assumption that there is only a single possibility for an emergency replenishment, but the rule is used repeatedly as a heuristic. Given a certain reorder point policy for normal replenishments, our decision rule will always reduce the expected costs. A simulation study illustrates that the suggested technique performs well under different conditions.

• Författare: Sven Axsäter
• Avdelning/ar: Produktionsekonomi
• Publiceringsår: 2007
• Språk: Engelska
• Sidor: 880-891
• Publikation/Tidskrift/Serie: European Journal of Operational Research
• Volym: 176
• Issue: 2
• Länkar: http://dx.doi.org/10.1016/j.ejor.2005.09.002
• Dokumenttyp: Artikel i tidskrift
• Förlag: Elsevier
• Ämne: Transport Systems and Logistics
• Nyckelord: stochastic; emergency supply; inventory control
• Status: Published
• ISBN/ISSN/Övrigt: ISSN: 0377-2217