An Optimal Expediting Policy for Periodic-Review Inventory Systems

32 Pages Posted: 30 Nov 2012

See all articles by Raik Özsen

Raik Özsen

University of Cologne - Department of Supply Chain Management and Management Science

Ulrich W. Thonemann

University of Cologne - Faculty of Management, Economics and Social Sciences

Date Written: November 28, 2012

Abstract

We analyze a periodic-review base-stock inventory system where outstanding orders can be expedited. Most inventory models assume that lead times are exogenously given, i.e., that orders arrive after a lead time that cannot be controlled by the inventory manager. However, in many situations inventory managers have the option to expedite open orders. We incorporate the expediting option into a periodic-review base-stock inventory model and solve the model optimally. We prove several structural properties of the model and show how the optimal solution can be computed efficiently. We numerically analyze the sensitivity of the inventory system with respect to the key parameters and quantify the benefit of order expediting using data from the service division of a global equipment manufacturer.

Keywords: periodic-review policy, inventory management, lead time flexibility, order expediting, order-up-to policy

Suggested Citation

Özsen, Raik and Thonemann, Ulrich W., An Optimal Expediting Policy for Periodic-Review Inventory Systems (November 28, 2012). Available at SSRN: https://ssrn.com/abstract=2182036 or http://dx.doi.org/10.2139/ssrn.2182036

Raik Özsen

University of Cologne - Department of Supply Chain Management and Management Science ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Ulrich W. Thonemann (Contact Author)

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

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