INVENTORY MODELS OF FUTURE-SUPPLY UNCERTAINTY WITH SINGLE AND MULTIPLE SUPPLIERS

We consider order-quantity/reorder-point inventory models where the av ailability of supply is subject to random fluctuations. We use concept s from renewal reward processes to develop average cost objective func tion models for single, two, and multiple suppliers. Identifying the r egenerative cycle for each problem aids the development of the cost fu nction. In the case of two suppliers, spectral theory is used to deriv e explicit expressions for the transient probabilities of a four-state continuous-time Markov chain representing the status of the system. T hese probabilities are used to compute the exact form of the average c ost expression. For the multiple-supplier problem, assuming that all t he suppliers have similar availability characteristics, we develop a s imple model and show that as the number of suppliers becomes large, th e model reduces to the classical EOQ model. (C) 1996 John Wiley & Sons , Inc.