Optimal Expediting Policies for a Serial Inventory System with Stochastic Lead Time and Visibility of Orders in Transit
Author(s)Kim, Chiwon; Klabjan, Diego; Simchi-Levi, David
Optimal Expediting Policies for a Serial Inventory System with Stochastic Lead Time
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In recent supply chains, often operating multiple delivery modes such as standard freight shipping and air is an effective way of addressing both delivery lead time uncertainties and service rates. We propose a model on how to optimally operate multiple delivery modes. We consider a serial supply chain and an expediting option from intermediate installations to the downstream of the chain. The goods move stochastically among the installations and the system faces a stochastic demand. We identify systems that yield simple optimal policies, in which both regular ordering and expediting follow a variant of the base stock policy. Expediting allows the system to be leaner due to the reduced regular order amount. In addition, we provide managerial insights linking expediting, base stock levels, and expediting costs based on analytical and numerical results.
DepartmentMassachusetts Institute of Technology. Department of Civil and Environmental Engineering
Production and Operations Management
Kim, Chiwon, Diego Klabjan, and David Simchi-Levi. “Optimal Expediting Policies for a Serial Inventory System with Stochastic Lead Time.” Prod Oper Manag 24, no. 10 (March 2, 2015): 1524–1536.
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