Joint Inventory Model with Supply Uncertainties and Partial Substitution
16 Pages Posted: 18 Feb 2021
Date Written: January 13, 2021
We study the joint inventory problem for two partially substitutable (organic and regular) products with different levels of supply reliability. Increasing substitution rate results in a decreased organic order but an increased regular order, as the regular product becomes an effective substitute during the organic product's stock-out. Higher disruption risk increases the order size of both products, but higher yield uncertainty only increases the organic order size whereas the regular order size decreases or remains unchanged.
Keywords: Inventory management, organic foods, supply disruptions, yield uncertainty, partial substitution
JEL Classification: C61, D02
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