1 CORAL - Centre for Operations Research Applications in Logistics, Aarhus School of Business, Aarhus BSS, Aarhus University2 Department of Business Studies, Aarhus School of Business, Aarhus BSS, Aarhus University3 Department of Economics and Business - Business Studies, Department of Economics and Business Economics, Aarhus BSS, Aarhus University4 Department of Economics and Business Economics, Aarhus BSS, Aarhus University5 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
This work inspired by a contact with a larger telecommunication company. Many of the products offered are unique for this company and they also have very short lifetimes, normally about 18 months. Furthermore the suppliers do not wish to keep any inventories and they only accept orders on periodic basis, most often only once per month. In addition lead-times are long, as the suppliers are situated overseas. Therefore the company must keep all the inventories at considerable costs. The company wishes to make contracts with its suppliers such that they keep some reserve inventory that can be accessed (at a higher unit price than the normal one) but also with a shorter lead-time. Furthermore the company must also pay a cost proportional to inventory level for maintaining this reserve inventory. This problem can be considered as an inventory control model with two suppliers. We propose a dynamic programming model to assess the economic impact of such an arrangement and also present some numerical results from this model.