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Replenishment Delays for Expensive Slow-Moving Items

Author

Listed:
  • Carl R. Schultz

    (Robert O. Anderson Schools of Management, University of New Mexico, Albuquerque, New Mexico 87131)

Abstract

Traditional single-item inventory control policies operating under continuous review call for the immediate placement of a replenishment order each time a demand causes the inventory position to drop to or below the order point. In an environment where lead times are small relative to the average time between demands, and holding costs are large relative to other inventory costs, it may be more economical to delay ordering to achieve holding cost savings with little additional risk or cost of shortages. This paper introduces the concept of delayed replenishment orders for expensive items subject to intermittent, unit-sized demands. The inventory system modeled is one with complete backlogging, constant lead times, arbitrary inter-demand distributions, linear carrying costs, and emergency handling of shortages at a premium cost. Results are given for the optimal delay for inter-demand distributions with increasing failure rates. Specific expressions for the optimal delay are given for several commonly used inter-demand distributions.

Suggested Citation

  • Carl R. Schultz, 1989. "Replenishment Delays for Expensive Slow-Moving Items," Management Science, INFORMS, vol. 35(12), pages 1454-1462, December.
    • Handle: RePEc:inm:ormnsc:v:35:y:1989:i:12:p:1454-1462
    DOI: 10.1287/mnsc.35.12.1454
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    Citations

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    Cited by:

    1. 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.
    2. Syntetos, A.A. & Teunter, R.H. & Babai, M.Z. & Transchel, S., 2016. "On the benefits of delayed ordering," European Journal of Operational Research, Elsevier, vol. 248(3), pages 963-970.
    3. Tekin, Eylem & Gurler, Ulku & Berk, Emre, 2001. "Age-based vs. stock level control policies for a perishable inventory system," European Journal of Operational Research, Elsevier, vol. 134(2), pages 309-329, October.
    4. Axsäter, Sven & Viswanathan, S., 2012. "On the value of customer information for an independent supplier in a continuous review inventory system," European Journal of Operational Research, Elsevier, vol. 221(2), pages 340-347.
    5. Gary Mitchell & Meike Niederhausen, 2010. "On Replenishing Items with Seasonal Intermittent Demand," American Journal of Economics and Business Administration, Science Publications, vol. 2(1), pages 90-102, March.

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