Inventory Management with Advance Supply Information

International Journal of Production Economics 129 (2011) 302-313

32 Pages Posted: 26 Aug 2016

See all articles by Mehmet Sekip Altug

Mehmet Sekip Altug

George Mason University

Alp Muharremoglu

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: September 10, 2010

Abstract

We consider a single stage inventory system with stochastic capacity. The manager receives forecasts from the upstream source about future capacity availability within an information horizon, referred to as "advance supply information". We study two main questions: I) How can advance supply information be utilized when making replenishment decisions? ii) What is the value of such information sharing, compared to a fixed base stock policy? We show that state-dependent base stock policies are optimal. We develop easily computable and implementable heuristic policies. We numerically test the accuracy of the approximations and analyze the value of collaboration under various business scenarios.

Suggested Citation

Altug, Mehmet Sekip and Muharremoglu, Alp, Inventory Management with Advance Supply Information (September 10, 2010). International Journal of Production Economics 129 (2011) 302-313. Available at SSRN: https://ssrn.com/abstract=2829547

Mehmet Sekip Altug (Contact Author)

George Mason University ( email )

VA 22030
United States

Alp Muharremoglu

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W Campbell Rd
SM 30
Richardson, TX 75080
United States

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