A comparison of the constant-order and dual-index policy for dual sourcing

S. Klosterhalfen, G.P. Kiesmuller, S. Minner

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Abstract

We analyze a periodic-review, single-stage stochastic demand inventory system with backorders and two supply options, a regular and a more expensive expedited one. Since the optimal policy for such a problem is generally unknown, we restrict our analysis to two simpler policies: the constant-order and the dual-index policy. We numerically explore the relative cost performance of both policies in a detailed simulation study and find that for long regular lead times the much simpler and from a practical point of view more attractive constant-order policy delivers very good or even better results than the dualindex one, which in previous research has been found to perform closely to the optimal policy.
Original languageEnglish
Place of PublicationEindhoven
PublisherTechnische Universiteit Eindhoven
Number of pages17
ISBN (Print)978-90-386-1420-5
Publication statusPublished - 2008

Publication series

NameBETA publicatie : working papers
Volume256
ISSN (Print)1386-9213

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