A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy
In supply chains, domestic and global, a producer must decide on an optimal quantity of items to order from suppliers and at what inventory level to place this order (the EOQ problem). We discuss how to modify the EOQ in the face of failures and recoveries by the supplier. This is the EOQ with disru...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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International Institute of Informatics and Cybernetics
2007-08-01
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| Series: | Journal of Systemics, Cybernetics and Informatics |
| Subjects: | |
| Online Access: | http://www.iiisci.org/Journal/CV$/sci/pdfs/P332062.pdf
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| _version_ | 1811274710490546176 |
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| author | David Heimann Frenck Waage |
| author_facet | David Heimann Frenck Waage |
| author_sort | David Heimann |
| collection | DOAJ |
| description | In supply chains, domestic and global, a producer must decide on an optimal quantity of items to order from suppliers and at what inventory level to place this order (the EOQ problem). We discuss how to modify the EOQ in the face of failures and recoveries by the supplier. This is the EOQ with disruption problem (EOQD). The supplier makes transitions between being capable and not being capable of filling an order in a Markov failure and recovery process. The producer adjusts the reorder point and the inventories to provide a margin of safety. Numerical solutions to the EOQD problem have been developed. In addition, a closed-form approximate solution has been developed for the zero inventory option (ZIO), where the inventory level on reordering is set to be zero. This paper develops a closed-form approximate solution for the EOQD problem when the reorder point can be non-zero, obtaining for that situation an optimal reorder quantity and optimal reorder point that represents an improvement on the optimal ZIO solution. The paper also supplies numerical examples demonstrating the cost savings against the ZIO situation, as well as the accuracy of the approximation technique. |
| first_indexed | 2024-04-12T23:24:02Z |
| format | Article |
| id | doaj.art-7e11aef33c484c49ae90c06d5e2ad915 |
| institution | Directory Open Access Journal |
| issn | 1690-4524 |
| language | English |
| last_indexed | 2024-04-12T23:24:02Z |
| publishDate | 2007-08-01 |
| publisher | International Institute of Informatics and Cybernetics |
| record_format | Article |
| series | Journal of Systemics, Cybernetics and Informatics |
| spelling | doaj.art-7e11aef33c484c49ae90c06d5e2ad9152022-12-22T03:12:27ZengInternational Institute of Informatics and CyberneticsJournal of Systemics, Cybernetics and Informatics1690-45242007-08-0154112A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder PolicyDavid Heimann0Frenck Waage1 University of Massachusetts Boston University of Massachusetts Boston In supply chains, domestic and global, a producer must decide on an optimal quantity of items to order from suppliers and at what inventory level to place this order (the EOQ problem). We discuss how to modify the EOQ in the face of failures and recoveries by the supplier. This is the EOQ with disruption problem (EOQD). The supplier makes transitions between being capable and not being capable of filling an order in a Markov failure and recovery process. The producer adjusts the reorder point and the inventories to provide a margin of safety. Numerical solutions to the EOQD problem have been developed. In addition, a closed-form approximate solution has been developed for the zero inventory option (ZIO), where the inventory level on reordering is set to be zero. This paper develops a closed-form approximate solution for the EOQD problem when the reorder point can be non-zero, obtaining for that situation an optimal reorder quantity and optimal reorder point that represents an improvement on the optimal ZIO solution. The paper also supplies numerical examples demonstrating the cost savings against the ZIO situation, as well as the accuracy of the approximation technique.http://www.iiisci.org/Journal/CV$/sci/pdfs/P332062.pdf OptimizationReliabilityOperations ManagementSystemicsSupply Chain Management |
| spellingShingle | David Heimann Frenck Waage A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy Journal of Systemics, Cybernetics and Informatics Optimization Reliability Operations Management Systemics Supply Chain Management |
| title | A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy |
| title_full | A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy |
| title_fullStr | A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy |
| title_full_unstemmed | A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy |
| title_short | A Closed-Form Approximation Solution for an Inventory Model with Supply Disruptions and Non-ZIO Reorder Policy |
| title_sort | closed form approximation solution for an inventory model with supply disruptions and non zio reorder policy |
| topic | Optimization Reliability Operations Management Systemics Supply Chain Management |
| url | http://www.iiisci.org/Journal/CV$/sci/pdfs/P332062.pdf
|
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