2021 journal article
An analysis of optimal ordering policies for a two-supplier system with disruption risk
Omega - The International Journal of Management Science.
author keywords: Dual sourcing; Unreliable supply; (s, S) policy
TL;DR:
This paper investigates the effects of parameter changes on the optimal policy and demonstrates that the two-supplier ordering policy is optimal under a wide range of system parameters beyond the conditions required in the optimality proof.
(via Semantic Scholar)
UN Sustainable Development Goal Categories
12. Responsible Consumption and Production
(Web of Science)
Source: Web Of Science
Added: September 13, 2021
• Optimal policy can be proved for a two-supplier system with an unreliable supplier. • Stable (s,S) policy is robust outside of parameter conditions for optimality. • There is an easily computed condition for exclusive unreliable supplier ordering. • Optimal policies move from exclusive ordering to splitting as key parameters vary. We study a single-product, periodic-review inventory system with the presence of fixed ordering cost. There are two suppliers: One is perfectly reliable while the other offers a cost advantage but is subject to possible supply interruptions. We present a theoretical framework with mathematical proofs for the optimal ordering policy in the finite-horizon setting, which exhibits an ( s , S ) structure, but with multiple, sometimes overlapping, reorder points and order-up-to levels. Then, we analyze the limiting behavior of our ( s , S ) policy and show that both the optimal cost and ordering policy parameters converge over time. This steady-state ( s , S ) policy characterizes the optimal sourcing strategy for the infinite-horizon setting. Through computational studies, we investigate the effects of parameter changes on the optimal policy and demonstrate that our two-supplier ( s , S ) ordering policy is optimal under a wide range of system parameters beyond the conditions required in the optimality proof.