Determining the Optimal Base Stock Level when Demand and Supply Disruption Length are Discretely Distributed
In the face of possibility of supply disruption, an organization needs an approach to deal with the problem. This research work uses an inventory holding approach to address the supply disruption problem under a periodic review base stock inventory system. The objective of this research work is to determine the optimal base stock level, which yields the minimum total costs per unit of time. Considering both demand and supply disruption length as discrete distributions can help an organization derives the optimal base stock level when both demand and supply disruption length do not fit with any prevailed distribution, which fills the gap in the literature. In the numerical experiment section, using a wide range of parameters, it is found that the optimal base stock level and the minimum expected total costs per unit of time can be determined.
Keywords: Supply disruption, Inventory holding, Base stock system, Periodic review inventory system.
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