Inventory models of future supply uncertainty with single and multiple suppliers
✍ Scribed by Mahmut Parlar; David Perry
- Publisher
- John Wiley and Sons
- Year
- 1996
- Tongue
- English
- Weight
- 1018 KB
- Volume
- 43
- Category
- Article
- ISSN
- 0894-069X
No coin nor oath required. For personal study only.
✦ Synopsis
We consider order-quantity / reorder-point inventory models where the availability of supply is subject to random fluctuations. We use concepts from renewal reward processes to develop average cost objective function models for single, two, and multiple suppliers. Identifying the regenerative cycle for each problem aids the development of the cost function. In the case of two suppliers, spectral theory is used to derive explicit expressions for the transient probabilities of a four-state continuous-time Markov chain representing the status of the system. These probabilities are used to compute the exact form of the average cost expression. For the multiple-supplier problem, assuming that all the suppliers have similar availability characteristics, we develop a simple model and show that as the number of suppliers becomes large, the model reduces to the classical EOQ model. 0 1996 John Wiley & Sons, Inc.
1. INTRODUCI'ION
In most inventory models, it is implicitly assumed that the product to be ordered is always available; that is, when an order is placed it is either received immediately (the case of zero lead time) or after a deterministic or perhaps random lead time. However, if the product is purchased from another company (as in the JIT deliveries of parts and components), then the supply of the product may sometimes be interrupted due to the suppliers' equipment breakdowns, labor strikes, or other unpredictable circumstances. As an example, a strike at an auto parts plant may result in disruptions of supply to a car manufacturer such as Chrysler or GM. Automobile manufacturing plants in Canada are mainly located in Southern Ontario and operations of these plants depend on the free flow of auto parts and components between Detroit and Windsor, Ontario. An unexpected disruption, such as the Canadian truckers' blockades of the bridge connecting Detroit and Windsor, causes serious interruptions in the flow, which may result in shutdowns of the Canadian plants. The OPEC oil embargoes of the 1970s resulted in disruptions in shipments of crude oil to several non-OPEC countries where many industries had to slow down or stop their production during the embargo. As a final example of supply interruptions we may cite the shortages of memory chips for the Intel 80386 based microcomputers in the late 1980s. As in these examples, when the outside supplier can cut off the supply at random times for durations of random length, or the product may be unavailable as in the case of