Abstract
We analyze a periodic-review base-stock inventory system where outstanding orders can be expedited. Most inventory models assume that lead times are exogenously given, i.e., that orders arrive after a lead time that cannot be controlled by the inventory manager. However, in many situations inventory managers have the option to expedite open orders. We incorporate the expediting option into a periodic-review base-stock inventory model and solve the model optimally. We prove several structural properties of the model and show how the optimal solution can be computed efficiently. We numerically analyze the sensitivity of the inventory system with respect to the key parameters and quantify the benefit of order expediting using data from the service division of a global equipment manufacturer.
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