Emergency orders in the periodic-review inventory system with fixed ordering costs and compound Poisson demand

The numerical study shows that the mixed policy found from our Markov decision model generally outperforms the best pure replenishment policy using either only normal or only emergency orders. Our model provides results that are similar to or slightly better than the results obtained with earlier models in the literature. Moreover, because our model accommodates compound Poisson demand, we are able to demonstrate that considerable cost reductions can then be obtained with the mixed policy when compared to the best pure replenishment policy. Finally, using sensitivity analysis we observe that a result on when a mixed policy is most beneficial, which has been found to hold for the simpler model without fixed ordering costs, seems to hold also for the more complex model that we investigate.