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A Periodic-Review Modeling Approach for Guaranteed Service Supply Chains

Author

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  • John M. Bossert

    (Optiant, Incorporated, Burlington, Massachusetts 01803)

  • Sean P. Willems

    (School of Management, Boston University, Boston, Massachusetts 02215)

Abstract

We extend the guaranteed service, supply chain modeling framework to allow for an arbitrary, integer review period or ordering frequency at each stage. We define a notation for the cyclic inventory dynamics that review periods introduce and generalize inventory-balance equations to accommodate three different periodic-review operating policies---constant base stock, constant safety stock, and adaptive base stock. As a form of validation, we apply the model to the Celanese acetic acid supply chain and show that inventory metrics of the new model differ by more than 30 percent from those derived through the simpler modeling approach of aggregating a review period into lead time.

Suggested Citation

  • John M. Bossert & Sean P. Willems, 2007. "A Periodic-Review Modeling Approach for Guaranteed Service Supply Chains," Interfaces, INFORMS, vol. 37(5), pages 420-436, October.
    • Handle: RePEc:inm:orinte:v:37:y:2007:i:5:p:420-436
    DOI: 10.1287/inte.1070.0298
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    References listed on IDEAS

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    1. Corey Billington & Gianpaolo Callioni & Barrett Crane & John D. Ruark & Julie Unruh Rapp & Trace White & Sean P. Willems, 2004. "Accelerating the Profitability of Hewlett-Packard's Supply Chains," Interfaces, INFORMS, vol. 34(1), pages 59-72, February.
    2. Stephen C. Graves & Sean P. Willems, 2000. "Optimizing Strategic Safety Stock Placement in Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 2(1), pages 68-83, June.
    3. Kenneth F. Simpson, 1958. "In-Process Inventories," Operations Research, INFORMS, vol. 6(6), pages 863-873, December.
    4. Stephen C. Graves, 1996. "A Multiechelon Inventory Model with Fixed Replenishment Intervals," Management Science, INFORMS, vol. 42(1), pages 1-18, January.
    5. Hau L. Lee & Corey Billington, 1993. "Material Management in Decentralized Supply Chains," Operations Research, INFORMS, vol. 41(5), pages 835-847, October.
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    Citations

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    Cited by:

    1. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    2. Barros, Júlio & Cortez, Paulo & Carvalho, M. Sameiro, 2021. "A systematic literature review about dimensioning safety stock under uncertainties and risks in the procurement process," Operations Research Perspectives, Elsevier, vol. 8(C).
    3. Fernando Bernstein & Yang Li & Kevin Shang, 2016. "A Simple Heuristic for Joint Inventory and Pricing Models with Lead Time and Backorders," Management Science, INFORMS, vol. 62(8), pages 2358-2373, August.
    4. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    5. Ingrid Farasyn & Salal Humair & Joel I. Kahn & John J. Neale & Oscar Rosen & John Ruark & William Tarlton & Wim Van de Velde & Glenn Wegryn & Sean P. Willems, 2011. "Inventory Optimization at Procter & Gamble: Achieving Real Benefits Through User Adoption of Inventory Tools," Interfaces, INFORMS, vol. 41(1), pages 66-78, February.
    6. Hua, N. Grace & Willems, Sean P., 2016. "Optimally configuring a two-stage serial line supply chain under the guaranteed service model," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 98-106.
    7. Kumar, Kunal & Aouam, Tarik, 2019. "Extending the strategic safety stock placement model to consider tactical production smoothing," European Journal of Operational Research, Elsevier, vol. 279(2), pages 429-448.
    8. John J. Neale & Sean P. Willems, 2009. "Managing Inventory in Supply Chains with Nonstationary Demand," Interfaces, INFORMS, vol. 39(5), pages 388-399, October.
    9. Grace Hua, N. & Willems, Sean P., 2016. "Analytical insights into two-stage serial line supply chain safety stock," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 107-112.
    10. Tian, Feng & Willems, Sean P. & Kempf, Karl G., 2011. "An iterative approach to item-level tactical production and inventory planning," International Journal of Production Economics, Elsevier, vol. 133(1), pages 439-450, September.
    11. Funaki, Kenichi, 2012. "Strategic safety stock placement in supply chain design with due-date based demand," International Journal of Production Economics, Elsevier, vol. 135(1), pages 4-13.
    12. Brian Wieland & Pat Mastrantonio & Sean P. Willems & Karl G. Kempf, 2012. "Optimizing Inventory Levels Within Intel's Channel Supply Demand Operations," Interfaces, INFORMS, vol. 42(6), pages 517-527, December.
    13. Eruguz, Ayse Sena & Sahin, Evren & Jemai, Zied & Dallery, Yves, 2016. "A comprehensive survey of guaranteed-service models for multi-echelon inventory optimization," International Journal of Production Economics, Elsevier, vol. 172(C), pages 110-125.

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