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Approximate Order Quantities and Reorder Points for Inventory Systems Where Orders Arrive in Two Shipments

Author

Listed:
  • Kamran Moinzadeh

    (University of Washington, Seattle, Washington)

  • Hau L. Lee

    (Stanford University, Stanford, California)

Abstract

In this paper, we consider an inventory system where orders may arrive in two shipments, that is, the first shipment of the order may contain only part of the items ordered, while the rest of the items arrive in a second shipment. However, the amount of the first shipment is random. Such situations arise when the supplier partially fills an order if it does not have sufficient stock to satisfy the amount demanded in an order, or when an arriving order contains defective items that can be returned to and replaced by the supplier at some later date. We present the operating characteristics and an approximate cost function for such a system. The properties of the approximate cost function are exploited to bound the search for the order quantity and reorder point that minimize it. Finally, the effectiveness of the approximate cost function in providing near-optimal solutions is evaluated by means of numerical examples.

Suggested Citation

  • Kamran Moinzadeh & Hau L. Lee, 1989. "Approximate Order Quantities and Reorder Points for Inventory Systems Where Orders Arrive in Two Shipments," Operations Research, INFORMS, vol. 37(2), pages 277-287, April.
    • Handle: RePEc:inm:oropre:v:37:y:1989:i:2:p:277-287
    DOI: 10.1287/opre.37.2.277
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    Citations

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    Cited by:

    1. Narendra Agrawal & Steven Nahmias, 1997. "Rationalization Of The Supplier Base In The Presence Of Yield Uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 6(3), pages 291-308, September.
    2. 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.
    3. Jakšič, M. & Fransoo, J.C., 2015. "Optimal inventory management with supply backordering," International Journal of Production Economics, Elsevier, vol. 159(C), pages 254-264.
    4. Hu, Fei & Lim, Cheng-Chew & Lu, Zudi, 2013. "Coordination of supply chains with a flexible ordering policy under yield and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 146(2), pages 686-693.
    5. 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.
    6. Ahiska, S. Sebnem & Appaji, Samyuktha R. & King, Russell E. & Warsing, Donald P., 2013. "A Markov decision process-based policy characterization approach for a stochastic inventory control problem with unreliable sourcing," International Journal of Production Economics, Elsevier, vol. 144(2), pages 485-496.
    7. Ankur Goel & Genaro J. Gutierrez, 2011. "Multiechelon Procurement and Distribution Policies for Traded Commodities," Management Science, INFORMS, vol. 57(12), pages 2228-2244, December.
    8. Kamran Moinzadeh & Steven Nahmias, 2000. "Adjustment Strategies for a Fixed Delivery Contract," Operations Research, INFORMS, vol. 48(3), pages 408-423, June.
    9. Ramesh Bollapragada & Uday S. Rao & Jun Zhang, 2004. "Managing Inventory and Supply Performance in Assembly Systems with Random Supply Capacity and Demand," Management Science, INFORMS, vol. 50(12), pages 1729-1743, December.
    10. David G. Lawson & Evan L. Porteus, 2000. "Multistage Inventory Management with Expediting," Operations Research, INFORMS, vol. 48(6), pages 878-893, December.

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