Smart Policies for Multi-Source Inventory Systems and General Tandem Queues with Order Tracking and Expediting

Forthcoming, Operations Research

46 Pages Posted: 17 Nov 2020 Last revised: 8 Aug 2022

See all articles by Jing-Sheng Jeannette Song

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business

Li Xiao

School of Business, Southern University of Science and Technology, China

Hanqin Zhang

National University of Singapore (NUS) - NUS Business School

Paul Zipkin

Duke University - Fuqua School of Business

Date Written: September 30, 2020

Abstract

We study an inventory system with multiple supply sources and expediting options. The replenishment lead times from each supply source are stochastic, representing congestion and disruption. We construct a family of smart ordering and expediting policies that utilize real-time supply information. Such dynamic policies are generally difficult to evaluate, because the corresponding supply system is a tandem queue with state-dependent arrivals and routing, whose queue-length steady-state distribution is usually not in product form. Our main result is to identify two appealing special cases of the general policy, Policy-M and Policy-E, which possess simple product-form solutions and lead to closed-form performance measures. Policy-M retains full sourcing flexibility but ignores upstream congestion in making expediting decisions. Policy-E only orders from the normal, farthest source but makes expediting decisions based on both upstream and downstream information. A numerical study shows that the best Policy-M leads to a lower average cost than the best Policy-E in almost all cases. Also, implementing the best Policy-M parameters, the general policy only performs slightly better than Policy-M. These observations reveal the value of combining sourcing flexibility with some, but limited, dynamic expediting. Our findings are equally applicable to the equivalent tandem queue. They thus may aid dynamic routing and expediting decisions for online retailers and logistics providers, among others.

Keywords: inventory, multiple supply sources, expediting, stochastic lead times, queueing networks, product-form solutions

Suggested Citation

Song, Jing-Sheng Jeannette and Xiao, Li and Zhang, Hanqin and Zipkin, Paul, Smart Policies for Multi-Source Inventory Systems and General Tandem Queues with Order Tracking and Expediting (September 30, 2020). Forthcoming, Operations Research, Available at SSRN: https://ssrn.com/abstract=3702068 or http://dx.doi.org/10.2139/ssrn.3702068

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Duke University
Durham, NC 27708
United States

HOME PAGE: http://people.duke.edu/~jssong/

Li Xiao (Contact Author)

School of Business, Southern University of Science and Technology, China ( email )

Hanqin Zhang

National University of Singapore (NUS) - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Paul Zipkin

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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