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A Heuristic for Triggering Emergency Orders in an Inventory System

På svenska

Author

  • Sven Axsäter

Summary, in English

This paper considers a single-echelon inventory system with a warehouse facing compound Poisson customer demand. Normally the warehouse replenishes from an outside supplier according to a continuous review reorder point policy. However, it is also possible to use emergency orders. Such orders incur additional costs but have a much shorter lead time. We consider standard holding and backorder costs as well as ordering costs. A heuristic decision rule for triggering emergency orders is suggested. The decision rule minimizes the expected costs under the assumption that there is only a single possibility for an emergency replenishment, but the rule is used repeatedly as a heuristic. Given a certain reorder point policy for normal replenishments, our decision rule will always reduce the expected costs. A simulation study illustrates that the suggested technique performs well under different conditions.

Publishing year

2007

Language

English

Pages

880-891

Publication/Series

European Journal of Operational Research

Volume

176

Issue

2

Document type

Journal article

Publisher

Elsevier

Topic

  • Transport Systems and Logistics

Keywords

  • stochastic
  • emergency supply
  • inventory control

Status

Published

ISBN/ISSN/Other

  • ISSN: 0377-2217