Abstract
This paper explores a periodic review inventory model under stochastic demand. The setup (or ordering) cost and the lead time are controllable. The model considers an imperfect production process, whose quality can be improved by means of an investment. A backorder price discount to motivate customers to wait for backorders is included. The demand in the protection interval is first assumed Gaussian; then, the distribution-free approach is adopted. The objective is to determine the review period, the setup cost, the quality level, the backorder price discount, and the length of lead time that minimize the long-run expected total cost per time unit. A solution method for each case is presented. Numerical experiments show that substantial savings can be achieved if the quality level, the setup cost and the lead time are controlled, and if a backorder price discount is applied. A sensitivity analysis is finally carried out.
Highlights
Inventories can be managed according to two alternative approaches: continuous review or periodic review
It has been observed that periodic review inventory models can often be found in managing inventory cases such as smaller retail stores, drug stores and grocery stores (Taylor, 2015)
Periodic review inventory models have gathered over the years great attention from researchers (Braglia, Castellano, & Song, 2017; Sarkar & Mahapatra, 2015; Wensing, 2011)
Summary
Inventories can be managed according to two alternative approaches: continuous review or periodic review. In the past, the number of systems using periodic review was much greater than the number using continuous review (Hadley & Whitin, 1963). It has been observed that periodic review inventory models can often be found in managing inventory cases such as smaller retail stores, drug stores and grocery stores (Taylor, 2015). Traditional inventory literature considers lead time as a prescribed deterministic quantity or a random variable. Under this viewpoint lead time is not controllable The concept of controllable lead time has been widely endorsed in the inventory management literature. The reader is referred to, e.g. Huang (2001), Lin (2009), Glock (2012), Braglia et al (2017)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
