A new order splitting model with stochastic lead times for deterioration items

Abstract

In unreliable supply environments, the strategy of pooling lead time risks by splitting replenishment orders among multiple suppliers simultaneously is an attractive sourcing policy that has captured the attention of academic researchers and corporate managers alike. While various assumptions are considered in the models developed, researchers tend to overlook an important inventory category in order splitting models: deteriorating items. In this paper, we study an order splitting policy for a retailer that sells a deteriorating product. The inventory system is modelled as a continuous review system (s, Q) under stochastic lead time. Demand rate per unit time is assumed to be constant over an infinite planning horizon and shortages are backordered completely. We develop two inventory models. In the first model, it is assumed that all the requirements are supplied by only one source, whereas in the second, two suppliers are available. We use sensitivity analysis to determine the situations in which each sourcing policy is the most economic. We then study a real case from the European pharmaceutical industry to demonstrate the applicability and effectiveness of the proposed models. Finally, more promising directions are suggested for future research.

Keywords:

• order splitting
• deteriorating items
• stochastic lead time
• optimal ordering policy

Additional information

Notes on contributors

Zeinab Sazvar

Zeinab Sazvar received her BSc and MSc degrees in Industrial Engineering from Sharif University of Technology (SUT) of Iran in 2006 and 2008, respectively. She is currently a PhD student in Industrial Engineering (SUT, Iran) and in Informatics and Mathematics (INSA Lyon, National Institute of Applied Sciences, France). Her current research interests include supply chain management, inventory control, revenue management and operation research.

Mohammad Reza Akbari Jokar

Mohammad Reza Akbari Jokar received his PhD degree in Industrial Engineering from Institut National Polytechnique de Grenoble (INPG), France, in 2001. He is currently a Professor in the Industrial Engineering Department of Sharif University of Technology (SUT), Iran. His research interests include supply chain management, logistics, and facility layout and location.

Armand Baboli

Armand Baboli received his PhD degree in Industrial Engineering in 1999 from Institut National Polytechnique de Grenoble (INPG) in France. He is currently an Associate Professor in the Industrial Engineering Department of INSA Lyon (National Institute of Applied Sciences) at University of Lyon, France. As well, he is team leader of organisation, control and integration of DISP Laboratory (Laboratory of Decision and Information for Production System). His current research interests include supply chain design and organisation, inventory management and facility layout planning.