“A base stock inventory model with possibility of rushing part of order”
This article studies a situation where a firm outsources production to a distant manufacturer. The firm has two possible freight modes for shipping the finished product from the manufacturer: a slow mode and a fast but more expensive mode. We formulate a dynamic model and use it to analyze how the firm can combine these two freight modes to enjoy the lower cost of the slow mode while using the fast mode as a hedge against cases in which the demand during the production lead time is high. The structure of the optimal solution of this dual freight mode strategy is in the form of a nested order-up-to policy. Several properties of the solution are characterized and these are compared to the case of deterministic demand and the two pure mode strategies. The analytical findings are extensively illustrated by numerical investigations throughout the paper. Finally, we show how to calculate the optimal dual freight mode policy and its cost efficiently when demand follows a Compound Poisson Process. This paper builds on the approach for inventory cost accounting in the paper below.
“End-of-period vs. continuous accounting of inventory related costs”
This paper investigates the effect of using an end-of-period accounting scheme for inventory related costs when costs actually accrue in continuous time. Using a simple model, we show that (i) the end-of-period scheme results in higher than optimal order-up-to levels and inventory cost if the cost and demand parameters are unchanged, and (ii) it is possible to replicate both the optimal base stock level and its cost by selecting the values of the cost or demand parameters judiciously. The cost adjustments often require extreme values and no systematic cost parameter adjustment scheme is robust. However, we find a systematic adjustment to the demand parameters which serves as a good approximation and is robust. We therefore conclude that end-of-period cost accounting without parameter adjustments is in general inappropriate when costs are incurred continuously, but there are adjustments that can make it work well.
Nils Rudi’s research is in operations management with overlap to information systems, marketing and finance. He has been focusing on supply chain management and how one can use different strategies (e.g., variety postponement, real options, flexibility, financial hedging and incentive structures) to better handle demand uncertainty. Journals where his research has appeared include Interfaces, Journal of Management Information Systems, Management Science, Manufacturing & Service Operations Management, Operations Research and Supply Chain Management Review.P>
After high school, Nils worked for three years as a computer programmer of ERP (Enterprise Resource Planning) systems at Movex. He then formed Minard, specializing in decision support systems for forecasting and inventory management. Minard did an IPO and went public on the Oslo Stock Exchange (Norway) in 1996. Other work experience range from consulting for firms in a wide variety of industries to negotiating professional football contracts.
Nils studied part time for a B.S. degree in computer science at Molde College (Norway), and holds a Ph.D. in operations management from University of Pennsylvania.
EVENT INFO :
- Start Date:April 27, 2007
- Start Time:17:00
- End Date:April 27, 2007
- End Time:18:00
- Location:ZLC, Lecture Room A1