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Dual Sourcing Inventory Model with Uncertain Supply and Advance Capacity Information

In: Operations Research Proceedings 2014

Author

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  • Marko Jakšič

    (University of Ljubljana)

Abstract

We model a periodic review, single stage dual sourcing inventory system with non-stationary stochastic demand, where replenishment can occur either through a regular stochastic capacitated supply channel with immediate delivery and/or an alternative uncapacitated supply channel with a longer fixed lead time. We focus on describing a situation in which upfront information on capacity availability of an unreliable supply channel is available, denoted as advance capacity information (ACI), to the customer. We derive the optimal dynamic programming formulation and we show some of the properties of the optimal policy by carrying out a numerical analysis. Additionally, our numerical results on the benefits of dual sourcing and the value of sharing ACI reveal several managerial insights.

Suggested Citation

  • Marko Jakšič, 2016. "Dual Sourcing Inventory Model with Uncertain Supply and Advance Capacity Information," Operations Research Proceedings, in: Marco Lübbecke & Arie Koster & Peter Letmathe & Reinhard Madlener & Britta Peis & Grit Walther (ed.), Operations Research Proceedings 2014, edition 1, pages 257-262, Springer.
    • Handle: RePEc:spr:oprchp:978-3-319-28697-6_36
    DOI: 10.1007/978-3-319-28697-6_36
    as

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