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Inventory models of future supply uncertainty with single and multiple suppliers

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  • Mahmut Parlar
  • David Perry

Abstract

We consider order‐quantity/reorder‐point inventory models where the availability of supply is subject to random fluctuations. We use concepts from renewal reward processes to develop average cost objective function models for single, two, and multiple suppliers. Identifying the regenerative cycle for each problem aids the development of the cost function. In the case of two suppliers, spectral theory is used to derive explicit expressions for the transient probabilities of a four‐state continuous‐time Markov chain representing the status of the system. These probabilities are used to compute the exact form of the average cost expression. For the multiple‐supplier problem, assuming that all the suppliers have similar availability characteristics, we develop a simple model and show that as the number of suppliers becomes large, the model reduces to the classical EOQ model. © 1996 John Wiley & Sons, Inc.

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  • Mahmut Parlar & David Perry, 1996. "Inventory models of future supply uncertainty with single and multiple suppliers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 43(2), pages 191-210, March.
    • Handle: RePEc:wly:navres:v:43:y:1996:i:2:p:191-210
    DOI: 10.1002/(SICI)1520-6750(199603)43:23.0.CO;2-5
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    References listed on IDEAS

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    1. Robert R. Meyer & Michael H. Rothkopf & Stephen A. Smith, 1979. "Reliability and Inventory in a Production-Storage System," Management Science, INFORMS, vol. 25(8), pages 799-807, August.
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    3. Mahmut Parlar & Defne Berkin, 1991. "Future supply uncertainty in EOQ models," Naval Research Logistics (NRL), John Wiley & Sons, vol. 38(1), pages 107-121, February.
    4. Hung-Po Chao, 1987. "Inventory Policy in the Presence of Market Disruptions," Operations Research, INFORMS, vol. 35(2), pages 274-281, April.
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