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Optimal policy structure characterization for a two-period dual-sourcing inventory control model with forecast updating

Author

Listed:
  • Zied Jemai

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

  • Ali Cheaitou

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

  • Christian van Delft

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Yves Dallery

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

Abstract

A proposed single-product, stochastic, two-period inventory control model combines demand forecast updating with the flexibility of two supply sources. Demand is modeled by two independent, random variables over a two-period selling season. At the beginning of the first period, two quantities are ordered using two different supply options: a local supplier who delivers the ordered quantity immediately and a second supplier who delivers the ordered quantity at the beginning of the second period. The local supplier charges a higher cost per ordered unit. The model considers an initial inventory, so the decision maker has an opportunity at the beginning of the first period to return part of the available inventory to the supplier (or sell it in a parallel market). At the end of the first period, any unsatisfied demand is backlogged to be satisfied in the next period. At the beginning of the second period, exogenous market information updates the second-period demand forecast. According to this updated forecast and the actual inventory level, an additional quantity is ordered using the local procurement source or another quantity is returned to the supplier (or sold in a parallel market). With a dynamic programming approach, this research exhibits the structure of the optimal policy, characterized by order-up-to and salvage-up-to levels. The findings provide the structure of the second-period conditional optimal policy and analytical insights that characterize the first-period optimal policy. Furthermore, a numerical study reveals the impact of information quality on the optimal policy and the trade-off between the two procurement options.

Suggested Citation

  • Zied Jemai & Ali Cheaitou & Christian van Delft & Yves Dallery, 2014. "Optimal policy structure characterization for a two-period dual-sourcing inventory control model with forecast updating," Post-Print hal-01672389, HAL.
  • Handle: RePEc:hal:journl:hal-01672389
    DOI: 10.1016/j.ijpe.2014.07.028
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    Citations

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    Cited by:

    1. Cheaitou, Ali & Cheaytou, Rima, 2019. "A two-stage capacity reservation supply contract with risky supplier and forecast updating," International Journal of Production Economics, Elsevier, vol. 209(C), pages 42-60.
    2. Zhang, Bin & Duan, Dongxia & Ma, Yurui, 2018. "Multi-product expedited ordering with demand forecast updates," International Journal of Production Economics, Elsevier, vol. 206(C), pages 196-208.
    3. Zheng, Meimei & Dong, Shuangshuang & Zhou, Yaoming & Choi, Tsan-Ming, 2023. "Sourcing decisions with uncertain time-dependent supply from an unreliable supplier," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1365-1379.
    4. Cheaitou, Ali & Larbi, Rim & Al Housani, Bashayer, 2019. "Decision making framework for tender evaluation and contractor selection in public organizations with risk considerations," Socio-Economic Planning Sciences, Elsevier, vol. 68(C).
    5. 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.
    6. Boulaksil, Youssef & Hamdouch, Younes & Ghoudi, Kilani & Fransoo, Jan C., 2021. "Comparing policies for the stochastic multi-period dual sourcing problem from a supply chain perspective," Other publications TiSEM 242598b9-99de-4a3c-a1a9-4, Tilburg University, School of Economics and Management.
    7. Boulaksil, Youssef & Hamdouch, Younes & Ghoudi, Kilani & Fransoo, Jan C., 2021. "Comparing policies for the stochastic multi-period dual sourcing problem from a supply chain perspective," International Journal of Production Economics, Elsevier, vol. 232(C).
    8. Xu, Qingyun & He, Yi & Shao, Zhen, 2023. "Retailer's ordering decisions with consumer panic buying under unexpected events," International Journal of Production Economics, Elsevier, vol. 266(C).
    9. Patra, T. Devi Prasad & Jha, J.K., 2021. "A two-period newsvendor model for prepositioning with a post-disaster replenishment using Bayesian demand update," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    10. Wang, Qingwei & Zheng, Meimei & Lee, Ka-Man & Shi, Xiaoqian & Shen, Yichi & Pan, Ershun, 2024. "Optimal product and after-sales service decisions considering risk attitudes under price-dependent uncertain demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).

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