Analysis of optimal opportunistic replenishment policies for inventory systems by using a (s,S) model with a maximum issue quantity restriction

K. L. Mak, K. K. Lai, W. C. Ng, Ka Fai Cedric Yiu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

12 Citations (Scopus)

Abstract

The analysis of optimal inventory replenishment policies for items having lumpy demand patterns is difficult, and has not been studied extensively although these items constitute an appreciable portion of inventory populations in parts and supplies types of stockholdings. This paper studies the control of an inventory item when the demand is lumpy. A continuous review (s,S) policy with a maximum issue quantity restriction and with the possibility of opportunistic replenishment is proposed to avoid the stock of these items being depleted unduly when all the customer orders are satisfied from the available inventory and to reduce ordering cost by coordinating inventory replenishments. The nature of the customer demands is approximated by a compound Poisson distribution. When a customer order arrives, if the order size is greater than the maximum issue quantity w, the order is satisfied by placing a special replenishment order rather than from the available stock directly. In addition, if the current inventory position is equal to or below a critical level A when such an order arrives, an opportunistic replenishment order which combines the special replenishment order and the regular replenishment order will be placed, in order to satisfy the customer's demand and to bring the inventory position to S. In this paper, the properties of the cost function of such an inventory system with respect to the control parameters s, S and A are analysed in detail. An algorithm is developed to determine the global optimal values of the control parameters. Indeed, the incorporation of the maximum issue quantity and opportunistic replenishment into the (s,S) policy reduces the total operating cost of the inventory system.
Original languageEnglish
Pages (from-to)385-405
Number of pages21
JournalEuropean Journal of Operational Research
Volume166
Issue number2
DOIs
Publication statusPublished - 16 Oct 2005
Externally publishedYes

Keywords

  • (s,S) policy
  • Inventory control
  • Maximum issue quantity
  • Opportunistic replenishment

ASJC Scopus subject areas

  • Information Systems and Management
  • Management Science and Operations Research
  • Statistics, Probability and Uncertainty
  • Applied Mathematics
  • Modelling and Simulation
  • Transportation

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