An inventory model with order expediting and splitting

Abstract

Expedited shipments are often seen in practice. When the inventory level of an item gets dangerously low after an order has been placed, material managers are often willing to expedite the order at extra costs. In this paper, we propose a single-item continuous review inventory policy with order expediting. Besides the two usual operational parameters: reorder point s and order quantity Q, it consists of a third parameter called the expediting level R. If inventory falls below R at the end of the manufacturing lead-time, the buyer can request the supplier to deliver part of an outstanding order via a fast transportation mode. A simple procedure is developed to obtain the optimal solution. Computational results show that the proposed policy is worthwhile to use if service level is high or the fixed cost of expediting is negligible.