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A Heuristic for Triggering Emergency Orders in an Inventory System

Axsäter, Sven LU (2007) In European Journal of Operational Research 176(2). p.880-891
Abstract
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... (More)
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. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
stochastic, emergency supply, inventory control
in
European Journal of Operational Research
volume
176
issue
2
pages
880 - 891
publisher
Elsevier
external identifiers
  • wos:000241709800014
  • scopus:33749582283
ISSN
0377-2217
DOI
10.1016/j.ejor.2005.09.002
language
English
LU publication?
yes
id
0581ff9e-728a-4337-92c1-c43727fb4787 (old id 629426)
date added to LUP
2008-02-04 12:21:35
date last changed
2017-02-12 03:22:52
@article{0581ff9e-728a-4337-92c1-c43727fb4787,
  abstract     = {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.},
  author       = {Axsäter, Sven},
  issn         = {0377-2217},
  keyword      = {stochastic,emergency supply,inventory control},
  language     = {eng},
  number       = {2},
  pages        = {880--891},
  publisher    = {Elsevier},
  series       = {European Journal of Operational Research},
  title        = {A Heuristic for Triggering Emergency Orders in an Inventory System},
  url          = {http://dx.doi.org/10.1016/j.ejor.2005.09.002},
  volume       = {176},
  year         = {2007},
}