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Effect of supply disruption on inventory policy

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  • Chirakiat Saithong
  • Huynh Trung Luong

Abstract

This research examines a two-stage supply chain that comprises a supplier who is subject to stochastic disruption and a retailer who has to deal with supply disruption by holding inventory. Under a periodic-review base-stock inventory policy, the main objectives of this study are to determine the optimal inventory policy in the presence of stochastic supply disruption so as to minimise the total inventory cost as well as to analyse the impact of supply disruption on the optimal inventory policy. In this research, the length of a supply disruption is modelled as a continuous random variable, distinguishing it from previous research which modelled the length of a supply disruption as a discrete random variable that receives values only as multiples of the length of a review period. Numerical experiments have been conducted to illustrate the applicability of the proposed inventory model and to examine the effects of various input parameters on the optimal inventory policy. Furthermore, compared with the optimal inventory policy derived when the length of a supply disruption is considered as a multiple of the length of a review period, the proposed inventory model in this research can help derive a more precise optimal inventory policy. [Received: 13 February 2017; Revised: 7 December 2017; Accepted: 17 October 2018]

Suggested Citation

  • Chirakiat Saithong & Huynh Trung Luong, 2019. "Effect of supply disruption on inventory policy," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 13(2), pages 178-212.
    • Handle: RePEc:ids:eujine:v:13:y:2019:i:2:p:178-212
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    Citations

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    Cited by:

    1. Karakatsoulis, G. & Skouri, K., 2023. "A periodic review inventory model facing different disruption profiles," International Journal of Production Economics, Elsevier, vol. 265(C).
    2. Manik Debnath & Sanat Kr. Mazumder & Md Billal Hossain & Arindam Garai & Csaba Balint Illes, 2023. "Optimal Base-Stock Inventory-Management Policies of Cement Retailers under Supply-Side Disruptions," Mathematics, MDPI, vol. 11(18), pages 1-34, September.
    3. Zhiping Lin & Jing Peng & Jia Wang, 2023. "The cash flows in push and pull supply chains under supply disruptions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1191-1202, March.

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