A CONTINUOUS REVIEW MODEL FOR AN INVENTORY SYSTEM WITH TWO SUPPLY MODES.

INVENTORY management systems; INVENTORY control; MATHEMATICAL models; MATERIALS management; INDUSTRIAL costs; ECONOMIC lot size; PRODUCTION management (Manufacturing); OPERATIONS research; LEAD time (Supply chain management); INDUSTRIAL procurement; STOCHASTIC models; INDUSTRIAL management

In this paper we develop an approximate model of an inventory control system in which there exist two options for resupply, with one having a shorter lead time. Because the optimal policy appears to be extremely complex, we consider a reasonable extension of the standard (Q, R) policy to allow for two different lot sizes Q[sub 1] and Q[sub 2], and two different reorder levels, R[sub 1] and R[sub 2]. Expressions for the expected on hand inventory and the expected backorders are developed and a procedure for determining the policy parameters is given. The model is validated by simulation, and calculations are included which compare the average annual cost with and without emergency ordering. [ABSTRACT FROM AUTHOR]

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