IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v204y2018icp1-17.html
   My bibliography  Save this article

On the benefit of dual-sourcing in managing perishable inventory

Author

Listed:
  • Kouki, Chaaben
  • Babai, M. Zied
  • Minner, Stefan

Abstract

We consider inventory systems for perishables with two-supply modes (a regular mode and an emergency one) characterized by different lead-times and costs. We investigate the value of dual-sourcing in the context of perishable items with a fixed or exponential lifetime. The inventory is controlled according to a base-stock policy where the emergency source is only used when the stock level is below a threshold level and by taking into account the age of pipeline orders. By using the information on the age of orders, which nowadays can be obtained in real time through technologies such as Radio Frequency Identification, we derive the steady-state behavior of the operating characteristics and thereby obtain the exact optimal expected total cost. Our results indicate that dual-sourcing can lead to substantial cost savings depending on the lifetime distribution. Under a fixed (exponential) lifetime, the shorter (the longer) the mean lifetime is, the higher the cost reduction, due to the reduced effect of the perishability when using dual sourcing. We also show that dual-sourcing exhibits higher savings when the excess demand is backordered as compared to the Case of lost sales. We show that the savings increase when the shortage cost and the outdating cost increase.

Suggested Citation

  • Kouki, Chaaben & Babai, M. Zied & Minner, Stefan, 2018. "On the benefit of dual-sourcing in managing perishable inventory," International Journal of Production Economics, Elsevier, vol. 204(C), pages 1-17.
    • Handle: RePEc:eee:proeco:v:204:y:2018:i:c:p:1-17
    DOI: 10.1016/j.ijpe.2018.06.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527318302597
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2018.06.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Haijema, René, 2013. "A new class of stock-level dependent ordering policies for perishables with a short maximum shelf life," International Journal of Production Economics, Elsevier, vol. 143(2), pages 434-439.
    2. S. Kalpakam & K. P. Sapna, 1996. "A lost sales (S — 1, S) perishable inventory system with renewal demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 43(1), pages 129-142, February.
    3. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    4. David Perry & M. J. M. Posner, 1998. "AN (S − 1, S) Inventory System with Fixed Shelf Life and Constant Lead Times," Operations Research, INFORMS, vol. 46(3-supplem), pages 65-71, June.
    5. Steven Nahmias, 2011. "Perishable Inventory Systems," International Series in Operations Research and Management Science, Springer, edition 1, number 978-1-4419-7999-5, December.
    6. Roni, Mohammad S. & Eksioglu, Sandra D. & Jin, Mingzhou & Mamun, Saleh, 2016. "A hybrid inventory policy with split delivery under regular and surge demand," International Journal of Production Economics, Elsevier, vol. 172(C), pages 126-136.
    7. Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
    8. Gad Allon & Jan A. Van Mieghem, 2010. "Global Dual Sourcing: Tailored Base-Surge Allocation to Near- and Offshore Production," Management Science, INFORMS, vol. 56(1), pages 110-124, January.
    9. Fredrik Olsson, 2014. "Analysis of inventory policies for perishable items with fixed leadtimes and lifetimes," Annals of Operations Research, Springer, vol. 217(1), pages 399-423, June.
    10. Olsson, Fredrik & Tydesjö, Patrik, 2010. "Inventory problems with perishable items: Fixed lifetimes and backlogging," European Journal of Operational Research, Elsevier, vol. 202(1), pages 131-137, April.
    11. Kouki, Chaaben & Babai, M. Zied & Jemai, Zied & Minner, Stefan, 2016. "A coordinated multi-item inventory system for perishables with random lifetime," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 226-237.
    12. Deming Zhou & Lawrence C. Leung & William P. Pierskalla, 2011. "Inventory Management of Platelets in Hospitals: Optimal Inventory Policy for Perishable Products with Regular and Optional Expedited Replenishments," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 420-438, October.
    13. Kamran Moinzadeh & Prabhu K. Aggarwal, 1997. "An Information Based Multiechelon Inventory System with Emergency Orders," Operations Research, INFORMS, vol. 45(5), pages 694-701, October.
    14. Jing-Sheng Song & Paul Zipkin, 2009. "Inventories with Multiple Supply Sources and Networks of Queues with Overflow Bypasses," Management Science, INFORMS, vol. 55(3), pages 362-372, March.
    15. Gallego, Guillermo & Jin, Yue & Muriel, Ana & Zhang, Ge & Yildiz, V. Taylan, 2007. "Optimal ordering policies with convertible lead times," European Journal of Operational Research, Elsevier, vol. 176(2), pages 892-910, January.
    16. Bakker, Monique & Riezebos, Jan & Teunter, Ruud H., 2012. "Review of inventory systems with deterioration since 2001," European Journal of Operational Research, Elsevier, vol. 221(2), pages 275-284.
    17. Duran, Alfonso & Gutierrez, Gil & Zequeira, Romulo I., 2004. "A continuous review inventory model with order expediting," International Journal of Production Economics, Elsevier, vol. 87(2), pages 157-169, January.
    18. Stephen A. Smith, 1977. "Optimal Inventories for an (S - 1, S) System with No Backorders," Management Science, INFORMS, vol. 23(5), pages 522-528, January.
    19. Dilupa Nakandala & Henry Lau & Paul K.C. Shum, 2017. "A lateral transshipment model for perishable inventory management," International Journal of Production Research, Taylor & Francis Journals, vol. 55(18), pages 5341-5354, September.
    20. Aditya Jain & Harry Groenevelt & Nils Rudi, 2010. "Continuous Review Inventory Model with Dynamic Choice of Two Freight Modes with Fixed Costs," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 120-139, August.
    21. Emre Berk & Ülkü Gürler, 2008. "Analysis of the ( Q , r ) Inventory Model for Perishables with Positive Lead Times and Lost Sales," Operations Research, INFORMS, vol. 56(5), pages 1238-1246, October.
    22. M Bijvank & I F A Vis, 2012. "Inventory control for point-of-use locations in hospitals," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(4), pages 497-510, April.
    23. Kamran Moinzadeh & Charles P. Schmidt, 1991. "An (S − 1, S) Inventory System with Emergency Orders," Operations Research, INFORMS, vol. 39(2), pages 308-321, April.
    24. Haijema, René & Minner, Stefan, 2016. "Stock-level dependent ordering of perishables: A comparison of hybrid base-stock and constant order policies," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 215-225.
    25. Johansen, Soren Glud & Thorstenson, Anders, 1998. "An inventory model with Poisson demands and emergency orders," International Journal of Production Economics, Elsevier, vol. 56(1), pages 275-289, September.
    26. Christian Howard & Johan Marklund & Tarkan Tan & Ingrid Reijnen, 2015. "Inventory Control in a Spare Parts Distribution System with Emergency Stocks and Pipeline Information," Manufacturing & Service Operations Management, INFORMS, vol. 17(2), pages 142-156, May.
    27. Charles P. Schmidt & Steven Nahmias, 1985. "(S - 1, S) Policies for Perishable Inventory," Management Science, INFORMS, vol. 31(6), pages 719-728, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Avinadav, Tal, 2020. "The effect of decision rights allocation on a supply chain of perishable products under a revenue-sharing contract," International Journal of Production Economics, Elsevier, vol. 225(C).
    2. 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.
    3. Barron, Yonit, 2022. "The continuous (S,s,Se) inventory model with dual sourcing and emergency orders," European Journal of Operational Research, Elsevier, vol. 301(1), pages 18-38.
    4. Hanukov, Gabi, 2022. "Improving efficiency of service systems by performing a part of the service without the customer's presence," European Journal of Operational Research, Elsevier, vol. 302(2), pages 606-620.
    5. Yonit Barron & Chananel Benshimol, 2024. "Emergency Supply Alternatives for a Storage Facility of a Repairable Multi-Component System," Mathematics, MDPI, vol. 12(17), pages 1-37, August.
    6. Liu, Wenqian & Ke, Ginger Y. & Chen, Jian & Zhang, Lianmin, 2020. "Scheduling the distribution of blood products: A vendor-managed inventory routing approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 140(C).
    7. Mohamed Ben-Daya & Elkafi Hassini & Zied Bahroun & Hafsa Saeed, 2023. "Optimal pricing in the presence of IoT investment and quality-dependent demand," Annals of Operations Research, Springer, vol. 324(1), pages 869-892, May.
    8. Chernonog, Tatyana, 2020. "Inventory and marketing policy in a supply chain of a perishable product," International Journal of Production Economics, Elsevier, vol. 219(C), pages 259-274.
    9. Kim, Yun Geon & Chung, Byung Do, 2024. "Data-driven Wasserstein distributionally robust dual-sourcing inventory model under uncertain demand," Omega, Elsevier, vol. 127(C).
    10. Liu, Chao & Lv, Jingyu & Hou, Ping & Lu, Danrong, 2023. "Disclosing products’ freshness level as a non-contractible quality: Optimal logistics service contracts in the fresh products supply chain," European Journal of Operational Research, Elsevier, vol. 307(3), pages 1085-1102.
    11. Kouki, Chaaben & Legros, Benjamin & Zied Babai, M. & Jouini, Oualid, 2020. "Analysis of base-stock perishable inventory systems with general lifetime and lead-time," European Journal of Operational Research, Elsevier, vol. 287(3), pages 901-915.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Kouki, Chaaben & Legros, Benjamin & Zied Babai, M. & Jouini, Oualid, 2020. "Analysis of base-stock perishable inventory systems with general lifetime and lead-time," European Journal of Operational Research, Elsevier, vol. 287(3), pages 901-915.
    3. Fredrik Olsson, 2019. "Simple modeling techniques for base-stock inventory systems with state dependent demand rates," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 90(1), pages 61-76, August.
    4. Dehghani, Maryam & Abbasi, Babak, 2018. "An age-based lateral-transshipment policy for perishable items," International Journal of Production Economics, Elsevier, vol. 198(C), pages 93-103.
    5. Barron, Yonit, 2022. "The continuous (S,s,Se) inventory model with dual sourcing and emergency orders," European Journal of Operational Research, Elsevier, vol. 301(1), pages 18-38.
    6. Hansen, Ole & Transchel, Sandra & Friedrich, Hanno, 2023. "Replenishment strategies for lost sales inventory systems of perishables under demand and lead time uncertainty," European Journal of Operational Research, Elsevier, vol. 308(2), pages 661-675.
    7. Eric Logan Huggins & Tava Lennon Olsen, 2010. "Inventory Control with Generalized Expediting," Operations Research, INFORMS, vol. 58(5), pages 1414-1426, October.
    8. Sean X. Zhou & Chaolin Yang, 2016. "Continuous-Review ( R, nQ ) Policies for Inventory Systems with Dual Delivery Modes," Operations Research, INFORMS, vol. 64(6), pages 1302-1319, December.
    9. Peter Berling & Victor Martínez-de-Albéniz, 2016. "Dynamic Speed Optimization in Supply Chains with Stochastic Demand," Transportation Science, INFORMS, vol. 50(3), pages 1114-1127, August.
    10. Bram Westerweel & Rob Basten & Jelmar den Boer & Geert‐Jan van Houtum, 2021. "Printing Spare Parts at Remote Locations: Fulfilling the Promise of Additive Manufacturing," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1615-1632, June.
    11. Haijema, René & Minner, Stefan, 2019. "Improved ordering of perishables: The value of stock-age information," International Journal of Production Economics, Elsevier, vol. 209(C), pages 316-324.
    12. Yonit Barron & Chananel Benshimol, 2024. "Emergency Supply Alternatives for a Storage Facility of a Repairable Multi-Component System," Mathematics, MDPI, vol. 12(17), pages 1-37, August.
    13. Hekimoğlu, Mustafa & Scheller-Wolf, Alan, 2023. "Dual sourcing models with stock-out dependent substitution," European Journal of Operational Research, Elsevier, vol. 311(2), pages 472-485.
    14. Ehsan Ahmadi & Dale T. Masel & Seth Hostetler & Reza Maihami & Iman Ghalehkhondabi, 2020. "A centralized stochastic inventory control model for perishable products considering age-dependent purchase price and lead time," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 28(1), pages 231-269, April.
    15. Johansen, Søren Glud, 2019. "Emergency orders in the periodic-review inventory system with fixed ordering costs and stochastic lead times for normal orders," International Journal of Production Economics, Elsevier, vol. 209(C), pages 205-214.
    16. Fredrik Olsson, 2014. "Analysis of inventory policies for perishable items with fixed leadtimes and lifetimes," Annals of Operations Research, Springer, vol. 217(1), pages 399-423, June.
    17. Kouki, Chaaben & Jouini, Oualid, 2015. "On the effect of lifetime variability on the performance of inventory systems," International Journal of Production Economics, Elsevier, vol. 167(C), pages 23-34.
    18. Johansson, Lina & Olsson, Fredrik, 2018. "Age-based inventory control in a multi-echelon system with emergency replenishments," European Journal of Operational Research, Elsevier, vol. 265(3), pages 951-961.
    19. Gioia, Daniele Giovanni & Minner, Stefan, 2023. "On the value of multi-echelon inventory management strategies for perishable items with on-/off-line channels," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
    20. Emre Berk & Ülkü Gürler & Saeed Poormoaied, 2020. "On the $$\varvec{(Q,r)}$$(Q,r) policy for perishables with positive lead times and multiple outstanding orders," Annals of Operations Research, Springer, vol. 284(1), pages 81-98, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:204:y:2018:i:c:p:1-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.