Optimal control policies for an inventory system with commitment lead time

Taher Ahmadi, Zümbül Atan, Ton de Kok (Corresponding author), Ivo Adan

Onderzoeksoutput: Bijdrage aan tijdschriftTijdschriftartikelAcademicpeer review

5 Citaten (Scopus)
61 Downloads (Pure)


We consider a firm which faces a Poisson customer demand and uses a base-stock policy to replenish its inventories from an outside supplier with a fixed lead time. The firm can use a preorder strategy which allows the customers to place their orders before their actual need. The time from a customer's order until the date a product is actually needed is called commitment lead time. The firm pays a commitment cost which is strictly increasing and convex in the length of the commitment lead time. For such a system, we prove the optimality of bang-bang and all-or-nothing policies for the commitment lead time and the base-stock policy, respectively. We study the case where the commitment cost is linear in the length of the commitment lead time in detail. We show that there exists a unit commitment cost threshold which dictates the optimality of either a buy-to-order (BTO) or a buy-to-stock strategy. The unit commitment cost threshold is increasing in the unit holding and backordering costs and decreasing in the mean lead time demand. We determine the conditions on the unit commitment cost for profitability of the BTO strategy and study the case with a compound Poisson customer demand.

Originele taal-2Engels
Pagina's (van-tot)193-212
Aantal pagina's20
TijdschriftNaval Research Logistics
Nummer van het tijdschrift3
StatusGepubliceerd - apr. 2019


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