Skip to main content
SpringerLink
Log in

Inventory Strategies to Manage Supply Disruptions

  • Chapter
  • First Online:
Supply Chain Disruptions

Abstract

Disruptions in supply chains occur routinely—both large ones, due to natural disasters, labor strikes, or terrorist attacks, and small ones, due to machine breakdowns, supplier stockouts, or quality problems (to name a few examples). Companies whose supply processes are affected by disruptions may experience delays in transportation and dysfunction in some of their facilities, which may result in inventory shortages. Although firms can take measures to prevent them, some disruptions are inevitable. Hence, in order to avoid the drastic impact of these disruptions, firms need to protect against them. There are multiple tactics that companies can choose from for managing the risk of disruptions. One of the most common tactics is to use inventory to buffer against the additional uncertainty. The main concern in inventory management problems is to find the optimal replenishment policy that tells when, from whom and how much to order.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    These terms are common in the literature, as are others, such as off/on and down/up.

  2. 2.

    More accurately, [31] uses \(\beta^{\prime} = r\lambda/(\lambda+\mu)\) for a constant r, but here we consider the special case of \(r=1\) since it is simpler and has a more natural interpretation.

  3. 3.

    There are conditions under which a ZIO policy is actually optimal, even if there are uncertainties in the system. However, this requires a sufficiently efficient design [5].

  4. 4.

    The analysis in this section is due to [23].

  5. 5.

    The results presented below also hold for a more general disruption process in which the recovery probability depends on the current length of the disruption.

  6. 6.

    The optimal stocking and allocation polices for distribution systems with random demand and disruption-free supply systems are unknown, as are the optimal policies for the system under consideration here.

  7. 7.

    These results are due to [28].

References

  1. Arreola-Risa A, DeCroix G (1998) Inventory management under random supply disruption and partial backorders. Nav Res Logist 45:687–703

    Article  MathSciNet  MATH  Google Scholar 

  2. Atan Z, Snyder L (2011) Disruptions in one-warehouse multiple-retailer systems. Working paper, Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  3. Atan Z, Rong Y, Snyder L (2011) Optimality of base-stock policies for serial supply chains. Working paper, Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA Lehigh University

    Google Scholar 

  4. Berk E, Arreola-Risa A (1994) Note on future supply uncertainty in EOQ models. Nav Res Logist 41:129–132

    Article  MathSciNet  MATH  Google Scholar 

  5. Bielecki T, Kumar P (1988) Optimality of zero-inventory policies for unreliable manufacturing systems. Oper Res 36(4):532–541

    Article  MathSciNet  MATH  Google Scholar 

  6. Clark AJ, Scarf H (1960) Optimal policies for a multi-echelon inventory problem. Manag Sci 6(4):475–490

    Article  Google Scholar 

  7. DeCroix GA (2010) Inventory management for an assembly system subject to component supplier disruptions. Working paper, Wisconsin School of Business, University of Wisconsin-Madison, Madison, WI

    Google Scholar 

  8. Eppen GD (1979) Effects of centralization on expected costs in a multi-location newsboy problem. Manag Sci 25(5):498–501

    Article  MATH  Google Scholar 

  9. Groenevelt H, Pintelon L, Seidmann A (1992) Production lot sizing with machine breakdowns. Manag Sci 38(1):104–123

    Article  MATH  Google Scholar 

  10. Groenevelt H, Pintelon L, Seidmann A (1992) Production batching with machine breakdowns and safety stocks. Oper Res 40(5):959–971

    Article  MATH  Google Scholar 

  11. Güllü R, Önol E, Erkip N (1997) Analysis of a deterministic demand production/inventory system under nonstationary supply uncertainty. IIE Trans 29:703–709

    Article  Google Scholar 

  12. Güllü R, Önol E, Erkip N (1999) Analysis of an inventory system under supply uncertainty. Int J Prod Econ 59:377–385

    Article  Google Scholar 

  13. Gupta D (1996) The (Q, r) inventory system with an unreliable supplier. INFOR 34(2):59–76

    MATH  Google Scholar 

  14. Heimann D, Waage F (2007) A closed-form approximation solution for an inventory model with supply disruptions and non-ZIO reorder policy. J Syst Cyber Inform 5(4):1–12

    Google Scholar 

  15. Mohebbi E (2003) Supply interruptions in a lost-sales inventory system with random lead time. Comput Oper Res 30:411–426

    Article  MATH  Google Scholar 

  16. Mohebbi E (2004) A replenishment model for the supply-uncertainty problem. Int J Prod Econ 87(1):25–37

    Article  Google Scholar 

  17. Mohebbi E, Hao D (2006) When suppliers availability affects the replenishment lead time an extension of the supply-interruption problem. Eur J Oper Res 175:992–1008

    Article  MATH  Google Scholar 

  18. Mohebbi E, Hao D (2008) An inventory model with non-resuming randomly interruptible lead time. Int J Prod Econ 114:755–768

    Article  Google Scholar 

  19. Moinzadeh K, Aggarwal P (1997) Analysis of a production/inventory system subject to random disruptions. Manag Sci 43(11):1577–1588

    Article  MATH  Google Scholar 

  20. Parlar M (1997) Continuous-review inventory problem with random supply interruptions. Eur J Oper Res 99:366–385

    Article  MATH  Google Scholar 

  21. Parlar M, Berkin D (1991) Future supply uncertainty in EOQ models. Nav Res Logist 38:107–121

    Article  MathSciNet  MATH  Google Scholar 

  22. Parlar M, Perry D (1996) Inventory models of future supply uncertainty with single and multiple suppliers. Nav Res Logist 43:191–210

    Article  MATH  Google Scholar 

  23. Parlar M, Wang Y, Gerchak Y (1995) A periodic review inventory model with Markovian supply availability. Int J Prod Econ 42:131–136

    Article  Google Scholar 

  24. Qi L, Shen ZJM, Snyder LV (2009) A continuous-review inventory model with disruptions at both supplier and retailer. Prod Oper Manag 18(5):516–532

    Article  Google Scholar 

  25. Qi L, Shen ZJM, Snyder LV (2010) The effect of supply disruptions on supply chain network design. Transp Sci 44(2):274-289

    Google Scholar 

  26. Rosling K (1989) Optimal inventory policies for assembly systems under random demands. Oper Res 37(4):565–579

    Article  MathSciNet  MATH  Google Scholar 

  27. Schmitt A, Snyder L, Shen ZJM (2010) Inventory systems with stochastic demand and supply: properties and approximations. Eur J Oper Res 206(2):313-328

    Google Scholar 

  28. Schmitt A, Snyder L, Shen ZJM (2011) Centralization versus decentralization: risk pooling, risk diversication, and supply uncertainty in a one-warehouse multiple-retailer system. Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  29. Snyder L, Shen ZJM (2006) Supply and demand uncertainty in multi-echelon supply chains. Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  30. Snyder L, Tomlin B (2008) Inventory management with advanced warning of disruptions. Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  31. Snyder LV (2011) A tight approximation for a continuous-review inventory model with supplier disruptions. Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  32. Snyder LV, Atan Z, Rong Y et al (2010) Supply chain disruptions: a review. Working paper, P.C. Rossin College of Engineering and Applied Sciences, Lehigh University, Bethlehem, PA

    Google Scholar 

  33. Song JS, Zipkin P (1996) Inventory control with information about supply conditions. Manag Sci 42(10):1409–1419

    Article  MATH  Google Scholar 

  34. Tomlin B (2006) On the value of mitigation and contingency strategies for managing supply chain disruption risks. Manag Sci 52(5):639–657

    Article  MathSciNet  MATH  Google Scholar 

  35. Vakharia AJ, Yenipazarli A (2008) Managing supply chain disruptions. Found Trends Technol Inf Oper Manag 2(4):243–325

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Industrial Engineering and Innovation Sciences, Eindhoven University of Technology, Eindhoven, The Netherlands

    Zümbül Atan

  2. Department of Industrial and Systems Engineering, Lehigh University, Bethlehem, PA, USA

    Lawrence V. Snyder

Authors
  1. Zümbül Atan
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Lawrence V. Snyder
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Lawrence V. Snyder .

Editor information

Editors and Affiliations

  1. , Department of Management, University of Miami, Coral Gables, 33124, Florida, USA

    Haresh Gurnani

  2. University of Miami, Coral Gables, 33124, Florida, USA

    Anuj Mehrotra

  3. , Desaulets Faculty of Management, McGill University, Sherbrooke St (W) 1001, Montreal, H3A 1G5, Canada

    Saibal Ray

Rights and permissions

Reprints and permissions

Copyright information

© 2012 Springer-Verlag London Limited

About this chapter

Cite this chapter

Atan, Z., Snyder, L.V. (2012). Inventory Strategies to Manage Supply Disruptions. In: Gurnani, H., Mehrotra, A., Ray, S. (eds) Supply Chain Disruptions. Springer, London. https://doi.org/10.1007/978-0-85729-778-5_5

Download citation

  • DOI: https://doi.org/10.1007/978-0-85729-778-5_5

  • Published:

  • Publisher Name: Springer, London

  • Print ISBN: 978-0-85729-777-8

  • Online ISBN: 978-0-85729-778-5

  • eBook Packages: EngineeringEngineering (R0)

Publish with us

Policies and ethics

Search

Navigation