Document Type

Article

Publication Date

9-11-2018

Department

Lazaridis School of Business and Economics

Abstract

We analyze a continuous review lost sales inventory system with two types of orders—regular and emergency. The regular order has a stochastic lead time and is placed with the cheapest acceptable supplier. The emergency order has a deterministic lead time is placed with a local supplier who has a higher price. The emergency order is not always filled since the supplier may not have the ability to provide the order on an emergency basis at all times. This emergency order has a higher cost per item and has a known probability of being filled. The total costs for this system are compared to a system without emergency placement of orders. This paper provides managers with a tool to assess when dual sourcing is cost optimal by comparing the single sourcing and dual sourcing models.

Comments

Copyright © 2018 by authors and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY 4.0).

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