A base stock inventory model with possibility of rushing part of order∗
نویسندگان
چکیده
This article studies a situation where a firm outsources production to a distant manufacturer. The firm has two possible freight modes; a slow mode and a fast but more expensive mode. We formulate a dynamic model and use it to analyze how the firm can combine these two freight modes to enjoy the lower cost of the slow mode while using the fast mode as a hedge against cases in which the demand during the production lead time is high. The structure of the optimal solution of this dual freight mode strategy is in the form of a nested order-up-to policy. Several properties of the solution are characterized and these are compared to the case of deterministic demand and the two pure mode strategies. The analytical findings are extensively illustrated by numerical investigations throughout the paper.
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