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

See all articles by Gary Gaukler

Gary Gaukler

Drucker School of Management

Özalp Özer

Jindal School of Management - The University of Texas at Dallas

Warren H. Hausman

Stanford Graduate School of Business

Date Written: 2008

Abstract

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

Suggested Citation

Gaukler, Gary and Özer, Özalp and Hausman, Warren H., Order Progress Information: Improved Dynamic Emergency Ordering Policies (2008). Production and Operations Management, Vol. 17, No. 6, November-December (2008). Available at SSRN: https://ssrn.com/abstract=3052051

Gary Gaukler

Drucker School of Management ( email )

The Drucker School of Management
1021 North Dartmouth Avenue
Claremont, CA 91711
United States

Özalp Özer (Contact Author)

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

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

Warren H. Hausman

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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