Order Progress Information: Improved Dynamic Emergency Ordering Policies
Production and Operations Management, Vol. 17, No. 6, November-December (2008)
15 Pages Posted: 14 Oct 2017 Last revised: 24 May 2018
Date Written: 2008
Technologies such as radio-frequency identification and global positioning systems can provide improved real-time tracking information for products and replenishment orders along the supply chain. We call this type of visibility order progress information. In this paper, we investigate how order progress information can be used to improve inventory replenishment decisions. To this end, we examine a retailer facing a stochastic lead time for order fulfillment. We characterize a replenishment policy that is based on the classical (Q, R) policy and that allows for releasing emergency orders in response to the order progress information. We show that the optimal structure of this policy is given by a sequence of threshold values dependent on order progress information. In a numerical study we evaluate the cost savings due to this improved replenishment policy.
Keywords: inventory control; supply chain visibility; RFID; stochastic lead times; order progress information; emergency ordering; global supply chains
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