Joint Inventory Model with Supply Uncertainties and Partial Substitution

16 Pages Posted: 18 Feb 2021

See all articles by Donggyu Jeon

Donggyu Jeon

Seoul National University, SNU Business School

Michael K. Lim

Seoul National University, SNU Business School

Zhenkang Peng

Shanghai Jiao Tong University (SJTU)-Antai College of Economics and Management

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: January 13, 2021

Abstract

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

Suggested Citation

Jeon, Donggyu and Lim, Michael K. and Peng, Zhenkang and Rong, Ying, Joint Inventory Model with Supply Uncertainties and Partial Substitution (January 13, 2021). Available at SSRN: https://ssrn.com/abstract=3765425

Donggyu Jeon

Seoul National University, SNU Business School ( email )

Seoul
Korea, Republic of (South Korea)

Michael K. Lim (Contact Author)

Seoul National University, SNU Business School ( email )

Seoul
Korea, Republic of (South Korea)

Zhenkang Peng

Shanghai Jiao Tong University (SJTU)-Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai, Shanghai 200030
China

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

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