Abstract

http://ssrn.com/abstract=1115410
 
 

References (28)



 
 

Citations (6)



 


 



Inventory Systems with Stochastic Demand and Supply: Properties and Approximations


Amanda J. Schmitt


MIT Center for Transportation & Logistics

Lawrence V. Snyder


Lehigh University - Department of Industrial and Systems Engineering

Zuo-Jun Max Shen


University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

December 12, 2009


Abstract:     
We model a retailer whose supplier is subject to complete supply disruptions. We combine discrete-event uncertainty (disruptions) and continuous sources of uncertainty (stochastic demand or supply yield), which have different impacts on optimal inventory settings. This prevents optimal solutions from being found in closed form. We develop a closed-form approximate solution by focusing on a single stochastic period of demand or yield. We show how the familiar newsboy fractile is a critical trade-off in these systems, since the optimal base-stock policies balance inventory holding costs with the risk of shortage costs generated by a disruption.

Number of Pages in PDF File: 36

Keywords: Supply disruptions, Inventory management

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Date posted: April 3, 2008 ; Last revised: February 22, 2010

Suggested Citation

Schmitt, Amanda J. and Snyder, Lawrence V. and Shen, Zuo-Jun Max, Inventory Systems with Stochastic Demand and Supply: Properties and Approximations (December 12, 2009). Available at SSRN: http://ssrn.com/abstract=1115410 or http://dx.doi.org/10.2139/ssrn.1115410

Contact Information

Amanda J. Schmitt (Contact Author)
MIT Center for Transportation & Logistics ( email )
77 Massachusetts Ave., E40
Cambridge, MA 02139
United States
Lawrence V. Snyder
Lehigh University - Department of Industrial and Systems Engineering ( email )
Harold S. Mohler Laboratory
200 West Packer Avenue
Bethlehem, PA 18015-1582
United States
Zuo-Jun Max Shen
University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR) ( email )
IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States
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