Journal
NAVAL RESEARCH LOGISTICS
Volume 56, Issue 2, Pages 127-141Publisher
WILEY
DOI: 10.1002/nav.20332
Keywords
inventory; dynamic programming; stochastic
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Funding
- National Science Foundation [DMI-0200439, DMI-9501740, DMI-0100511]
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We consider a make to order production system where two major components, one nonperishable (referred to as part 1) and one perishable (part 2), are needed to fulfill a customer order. In each period, replenishment decisions for both parts need to be made jointly before demand is realized and a fixed ordering cost is incurred for the nonperishable part. We show that a simple (s(n), S-n(1), S1/n) policy is optimal. Under this policy, S1/n along with the number of backorders at the beginning of a period if any and the availability of the nonperishable part (part 1) determines the optimal order quantity of the perishable part (part 2). while (S-n, S-n(1)) guide when and how much of part 1 to order at each state. Numerical study demonstrates that the benefits of using the joint replenishment policy can be substantial, especially when the unit costs are high and/or the profit margin is low. (C) 2009 Wiley Periodicals, Inc. Naval Research Logistics 56: 177-141, 2009
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