Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
478654 | European Journal of Operational Research | 2010 | 16 Pages |
Abstract
We model a retailer whose supplier is subject to complete supply disruptions. We combine discrete-event uncertainty (disruptions) and continuous sources of uncertainty (stochastic demand or supply yield), which have different impacts on optimal inventory settings. This prevents optimal solutions from being found in closed form. We develop a closed-form approximate solution by focusing on a single stochastic period of demand or yield. We show how the familiar newsboy fractile is a critical trade-off in these systems, since the optimal base-stock policies balance inventory holding costs with the risk of shortage costs generated by a disruption.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Amanda J. Schmitt, Lawrence V. Snyder, Zuo-Jun Max Shen,