Dual Sourcing Inventory Systems: On Optimal Policies and the Value of Costless Returns

Janakiraman, G and Seshadri, S (2016) Dual Sourcing Inventory Systems: On Optimal Policies and the Value of Costless Returns. Production and Operations Management.

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Abstract

We study dual sourcing inventory systems with backordering and with stationary, stochastic demands. The two supply sources differ in their unit prices and lead times. We focus on the option of making costless returns to the cheaper, longer-leadtime supplier. We show that the value of this option is zero. Our analysis leading to this result includes the derivation of several structural properties of the optimal policies for dual sourcing systems with and without the return option.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Seshadri, Shttp://orcid.org/0000-0002-7917-5537
Item Type: Article
Uncontrolled Keywords: Investment, Cost
Subjects: Business and Management
Depositing User: Veeramani R
Date Deposited: 14 Sep 2016 19:14
Last Modified: 14 Sep 2016 19:14
URI: http://eprints.exchange.isb.edu/id/eprint/505
Publisher URL: http://dx.doi.org/10.1111/poms.12636
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/1059-1478/
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