Inventory control with an order-time constraint : Optimality, uniqueness and significance

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

6 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)603-640
Journal / PublicationAnnals of Operations Research
Volume181
Issue number1
Publication statusPublished - Dec 2010
Externally publishedYes

Abstract

This paper analyzes a stochastic inventory problem with an order-time constraint that restricts the times at which a manufacturer places new orders to a supplier. This constraint stems from the limited upstream capacity in a supply chain, such as production capacity at a supplier or transportation capacity between a supplier and a manufacturer. Consideration of limited upstream capacity extends the classical inventory literature that unrealistically assumes infinite supplier/transporter capacity. But this consideration increases the complexity of the problem. We study the constraint under a Poisson demand process and allow for a fixed ordering cost. In presence of the constraint, we establish the optimality of an (s,S) policy under both the discounted and average cost objectives. Under the average cost objective, we show the uniqueness of the order-up-to level S. We numerically compare our model with the classical unconstrained model. We report significant savings in costs that can be achieved by using our model when the order time is constrained. © 2010 Springer Science+Business Media, LLC.

Research Area(s)

  • Order time constraint, Positive leadtime, Stochastic inventory control

Citation Format(s)

Inventory control with an order-time constraint : Optimality, uniqueness and significance. / Bensoussan, Alain; Moussawi-Haidar, Lama; Çakanyildirim, Metin.

In: Annals of Operations Research, Vol. 181, No. 1, 12.2010, p. 603-640.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review