A two-supplier inventory model

In this paper, we consider an inventory system with two suppliers. A supply agreement is made with one of the suppliers, to deliver a fixed quantity Q every review period. The replenishment decisions for the other supplier ar e governed by a (R, S) replenishment policy; that is, when the inventory po sition at a review period is below the order-up-to level S, an order is pla ced at the second supplier such that the inventory position is raised up to S. In this paper, an algorithm is developed for the determination of the d ecision parameters S and Q such that the long-run expected average costs pe r time unit are minimized subject to a service level constraint. The costs are defined as the sum of the holding, purchasing, and ordering costs. Base d on the numerical results, conclusions follow about the division of the pu rchase volume among the two suppliers. (C) 1999 Elsevier Science B.V. All r ights reserved.