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A periodic-review inventory system with a capacitated backup supplier for mitigating supply disruptions

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  • Chen, Junlin
  • Zhao, Xiaobo
  • Zhou, Yun

Abstract

We consider a periodic-review inventory system with two suppliers: an unreliable regular supplier that may be disrupted for a random duration, and a reliable backup supplier that can be used during a disruption. The backup supplier charges higher unit purchasing cost and fixed order cost when compared to the regular supplier. Because the backup supplier is used at unplanned moments, its capacity to replenish inventory is considered limited. Analytical results partially characterize the structure of the optimal order policy: a state-dependent (X(i),Y(i)) band structure (with corresponding bounds of X(i) and Y(i) to be given), where i represents the status of the regular supplier. Numerical studies illustrate the structure of the optimal policy and investigate the impacts of major parameters on optimal order decisions and system costs.

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  • Chen, Junlin & Zhao, Xiaobo & Zhou, Yun, 2012. "A periodic-review inventory system with a capacitated backup supplier for mitigating supply disruptions," European Journal of Operational Research, Elsevier, vol. 219(2), pages 312-323.
    • Handle: RePEc:eee:ejores:v:219:y:2012:i:2:p:312-323
    DOI: 10.1016/j.ejor.2011.12.031
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    3. Huang, Boray & Wu, Andy, 2017. "Reduce shortage with self-reservation policy for a manufacturer paying both fixed and variable stockout expenditure," European Journal of Operational Research, Elsevier, vol. 262(3), pages 944-953.
    4. Ni, Ni & Howell, Brendan J. & Sharkey, Thomas C., 2018. "Modeling the impact of unmet demand in supply chain resiliency planning," Omega, Elsevier, vol. 81(C), pages 1-16.
    5. Jong Soo Kim & Eunhee Jeon & Jiseong Noh & Jun Hyeong Park, 2018. "A Model and an Algorithm for a Large-Scale Sustainable Supplier Selection and Order Allocation Problem," Mathematics, MDPI, vol. 6(12), pages 1-19, December.
    6. Faiza Hamdi & Ahmed Ghorbel & Faouzi Masmoudi & Lionel Dupont, 2018. "Optimization of a supply portfolio in the context of supply chain risk management: literature review," Journal of Intelligent Manufacturing, Springer, vol. 29(4), pages 763-788, April.
    7. Ledwoch, Anna & Yasarcan, Hakan & Brintrup, Alexandra, 2018. "The moderating impact of supply network topology on the effectiveness of risk management," International Journal of Production Economics, Elsevier, vol. 197(C), pages 13-26.
    8. Wagner, Laura & Gürbüz, Mustafa Ҫagri & Parlar, Mahmut, 2019. "Is it fake? Using potentially low quality suppliers as back-up when genuine suppliers are unavailable," International Journal of Production Economics, Elsevier, vol. 213(C), pages 185-200.
    9. Taleizadeh, Ata Allah & Tafakkori, Keivan & Thaichon, Park, 2021. "Resilience toward supply disruptions: A stochastic inventory control model with partial backordering under the base stock policy," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    10. Shin Hee Baek & Jong Soo Kim, 2020. "Efficient Algorithms for a Large-Scale Supplier Selection and Order Allocation Problem Considering Carbon Emissions and Quantity Discounts," Mathematics, MDPI, vol. 8(10), pages 1-17, September.
    11. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    12. Gupta, Varun & Ivanov, Dmitry & Choi, Tsan-Ming, 2021. "Competitive pricing of substitute products under supply disruption," Omega, Elsevier, vol. 101(C).
    13. Hishamuddin, H. & Sarker, R.A. & Essam, D., 2012. "A disruption recovery model for a single stage production-inventory system," European Journal of Operational Research, Elsevier, vol. 222(3), pages 464-473.
    14. Rongfang Yan & Dejun Kou & Bin Lu, 2019. "Optimal Order Policies for Dual-Sourcing Supply Chains under Random Supply Disruption," Sustainability, MDPI, vol. 11(3), pages 1-14, January.
    15. Kamalahmadi, Masoud & Parast, Mahour Mellat, 2017. "An assessment of supply chain disruption mitigation strategies," International Journal of Production Economics, Elsevier, vol. 184(C), pages 210-230.
    16. Lücker, Florian & Seifert, Ralf W., 2017. "Building up Resilience in a Pharmaceutical Supply Chain through Inventory, Dual Sourcing and Agility Capacity," Omega, Elsevier, vol. 73(C), pages 114-124.
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    19. Sevgen, Arya & Sargut, F. Zeynep, 2019. "May reorder point help under disruptions?," International Journal of Production Economics, Elsevier, vol. 209(C), pages 61-69.

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