IDEAS home Printed from https://ideas.repec.org/p/ems/eureri/50255.html
   My bibliography  Save this paper

Approximate Order-up-to Policies for Inventory Systems with Binomial Yield

Author

Listed:
  • Ju, W.
  • Gabor, A.F.
  • van Ommeren, J.C.W.

Abstract

This paper studies an inventory policy for a retailer who orders his products from a supplier whose deliveries only partially satisfy the quality require- ments. We model this situation by an infinite-horizon periodic-review model with binomial random yield and positive lead time. We propose an order- up-to policy based on approximating the inventory model with unreliable supplier by a model with a reliable supplier and suitably modified demand distribution. The performance of the order-up-to policy is verified by com- paring it with both the optimal policy and the safety stock policy proposed in Inderfurth & Vogelgesang (2013). Further, we extend our approximation to a dual-sourcing model with two suppliers: the first slow and unreliable, and the other fast and fully reliable. Compared to the dual-index order- up-to policy for the model with full information on the yield, the proposed approximation gives promising results.

Suggested Citation

  • Ju, W. & Gabor, A.F. & van Ommeren, J.C.W., 2013. "Approximate Order-up-to Policies for Inventory Systems with Binomial Yield," ERIM Report Series Research in Management ERS-2013-017-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:50255
    as

    Download full text from publisher

    File URL: https://repub.eur.nl/pub/50255/ERS-2013-017-LIS.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. George Tagaras & Dimitrios Vlachos, 2001. "A Periodic Review Inventory System with Emergency Replenishments," Management Science, INFORMS, vol. 47(3), pages 415-429, March.
    3. Anshul Sheopuri & Ganesh Janakiraman & Sridhar Seshadri, 2010. "New Policies for the Stochastic Inventory Control Problem with Two Supply Sources," Operations Research, INFORMS, vol. 58(3), pages 734-745, June.
    4. Mordechai Henig & Yigal Gerchak, 1990. "The Structure of Periodic Review Policies in the Presence of Random Yield," Operations Research, INFORMS, vol. 38(4), pages 634-643, August.
    5. Inderfurth, Karl & Vogelgesang, Stephanie, 2013. "Concepts for safety stock determination under stochastic demand and different types of random production yield," European Journal of Operational Research, Elsevier, vol. 224(2), pages 293-301.
    6. Srinivas Bollapragada & Thomas E. Morton, 1999. "Myopic Heuristics for the Random Yield Problem," Operations Research, INFORMS, vol. 47(5), pages 713-722, October.
    7. Senthil Veeraraghavan & Alan Scheller-Wolf, 2008. "Now or Later: A Simple Policy for Effective Dual Sourcing in Capacitated Systems," Operations Research, INFORMS, vol. 56(4), pages 850-864, August.
    8. Burak Kazaz, 2004. "Production Planning Under Yield and Demand Uncertainty with Yield-Dependent Cost and Price," Manufacturing & Service Operations Management, INFORMS, vol. 6(3), pages 209-224, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ju, Wanrong & Gabor, Adriana F. & van Ommeren, J.C.W., 2015. "An approximate policy for a dual-sourcing inventory model with positive lead times and binomial yield," European Journal of Operational Research, Elsevier, vol. 244(2), pages 490-497.
    2. Inderfurth, K. & Kiesmüller, G.P., 2015. "Exact and heuristic linear-inflation policies for an inventory model with random yield and arbitrary lead times," European Journal of Operational Research, Elsevier, vol. 245(1), pages 109-120.
    3. G. P. Kiesmüller & K. Inderfurth, 2018. "Approaches for periodic inventory control under random production yield and fixed setup cost," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(2), pages 449-477, March.
    4. Karl Inderfurth & Gudrun Kiesmüller, 2013. "Exact and heuristic linear-inflation policies for an inventory model with random yield and arbitrary lead times," FEMM Working Papers 130007, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    5. Peter Berling & Danja R. Sonntag, 2022. "Inventory control in production–inventory systems with random yield and rework: The unit‐tracking approach," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2628-2645, June.
    6. Song, Yuyue & Wang, Yunzeng, 2017. "Periodic review inventory systems with fixed order cost and uniform random yield," European Journal of Operational Research, Elsevier, vol. 257(1), pages 106-117.
    7. Laurent Lim, Lâm & Alpan, Gülgün & Penz, Bernard, 2014. "Reconciling sales and operations management with distant suppliers in the automotive industry: A simulation approach," International Journal of Production Economics, Elsevier, vol. 151(C), pages 20-36.
    8. Gel, Esma S. & Salman, F. Sibel, 2022. "Dynamic ordering decisions with approximate learning of supply yield uncertainty," International Journal of Production Economics, Elsevier, vol. 243(C).
    9. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    10. Xu, He & Zuo, Xiaolu & Liu, Zhixue, 2015. "Configuration of flexibility strategies under supply uncertainty," Omega, Elsevier, vol. 51(C), pages 71-82.
    11. Danja Sonntag & Gudrun P. Kiesmüller, 2016. "The shape of the yield and its impact on inventory decisions," 4OR, Springer, vol. 14(4), pages 405-415, December.
    12. Qi Feng & J. George Shanthikumar, 2018. "Supply and Demand Functions in Inventory Models," Operations Research, INFORMS, vol. 66(1), pages 77-91, 1-2.
    13. Sonntag, Danja & Kiesmüller, Gudrun P., 2018. "Disposal versus rework – Inventory control in a production system with random yield," European Journal of Operational Research, Elsevier, vol. 267(1), pages 138-149.
    14. Chand, Suresh & Li, Jian & Xu, Yanyi, 2016. "A periodic review inventory model with two delivery modes, fractional lead-times, and age-and-period-dependent backlogging costs," International Journal of Production Economics, Elsevier, vol. 173(C), pages 199-206.
    15. Gad Allon & Jan A. Van Mieghem, 2010. "Global Dual Sourcing: Tailored Base-Surge Allocation to Near- and Offshore Production," Management Science, INFORMS, vol. 56(1), pages 110-124, January.
    16. 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.
    17. Seung Hwan Jung, 2020. "Offshore versus Onshore Sourcing: Quick Response, Random Yield, and Competition," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 750-766, March.
    18. Dettenbach, Marcus & Thonemann, Ulrich W., 2015. "The value of real time yield information in multi-stage inventory systems – Exact and heuristic approaches," European Journal of Operational Research, Elsevier, vol. 240(1), pages 72-83.
    19. Xu, He, 2010. "Managing production and procurement through option contracts in supply chains with random yield," International Journal of Production Economics, Elsevier, vol. 126(2), pages 306-313, August.
    20. Robert N. Boute & Jan A. Van Mieghem, 2015. "Global Dual Sourcing and Order Smoothing: The Impact of Capacity and Lead Times," Management Science, INFORMS, vol. 61(9), pages 2080-2099, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ems:eureri:50255. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RePub (email available below). General contact details of provider: https://edirc.repec.org/data/erimanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.