May reorder point help under disruptions?

We study a continuous-review inventory problem of a retailer observing constant deterministic demand and ordering from a supplier. This is an extension of Economic Order Quantity model (EOQ), in which both supplier and retailer are subject to random disruptions. The supplier is assumed to be at two...

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Bibliographic Details
Published inInternational journal of production economics Vol. 209; pp. 61 - 69
Main Authors Sevgen, Arya, Sargut, F. Zeynep
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.03.2019
Subjects
Disruption
Economic order quantity
Inventory control
Lost sales
Reorder point
Lost sales
Inventory control
Disruption
Reorder point
Economic order quantity
Online AccessGet full text
ISSN0925-5273
1873-7579
DOI10.1016/j.ijpe.2018.02.014

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Summary:We study a continuous-review inventory problem of a retailer observing constant deterministic demand and ordering from a supplier. This is an extension of Economic Order Quantity model (EOQ), in which both supplier and retailer are subject to random disruptions. The supplier is assumed to be at two states, which are available and unavailable. When the retailer is disrupted, all on-hand inventory is destroyed, but the retailer recovers immediately to serve customers. All unsatisfied demand at retailer is assumed to be lost. We create a mathematical model to determine optimal parameters of an order-up-to type policy for the retailer and investigate the importance of a non-zero reorder point for the retailer. With computational experiments, we identify when a non-zero reorder point is cost saving, and compare our solution with classical EOQ.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2018.02.014