TY - JOUR
T1 - Operational hedging through dual-sourcing under capacity uncertainty
AU - Chen, Xin
N1 - Funding Information:
This research is partly supported by National Science Foundation (NSF) Grants CMMI-1363261, CMMI-1538451, CMMI-1635160 and National Science Foundation of China (NSFC) Grant 71520107001.
PY - 2017/12/21
Y1 - 2017/12/21
N2 - This paper studies a periodic-review dual-sourcing inventory system with demand and supply capacity uncertainty. Compared with dual-sourcing models with deterministic supply capacities, a challenge here is that the objective functions in the dynamic programming recursions are not convex in the ordering quantities. To address this challenge, a powerful transformation technique is developed which converts a non- convex minimization problem to an equivalent convex minimization problem. In addition, the transformation preserves L\-convexity, allowing one to derive structural properties of the optimal policies for the dual-sourcing problem with random supply capacity. Dual-index policies are shown to be optimal under certain conditions. The effects of supply capacity uncertainties on the system performance are investigated.
AB - This paper studies a periodic-review dual-sourcing inventory system with demand and supply capacity uncertainty. Compared with dual-sourcing models with deterministic supply capacities, a challenge here is that the objective functions in the dynamic programming recursions are not convex in the ordering quantities. To address this challenge, a powerful transformation technique is developed which converts a non- convex minimization problem to an equivalent convex minimization problem. In addition, the transformation preserves L\-convexity, allowing one to derive structural properties of the optimal policies for the dual-sourcing problem with random supply capacity. Dual-index policies are shown to be optimal under certain conditions. The effects of supply capacity uncertainties on the system performance are investigated.
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U2 - 10.1561/0200000078
DO - 10.1561/0200000078
M3 - Article
AN - SCOPUS:85039800807
SN - 1571-9545
VL - 11
SP - 46
EP - 64
JO - Foundations and Trends in Technology, Information and Operations Management
JF - Foundations and Trends in Technology, Information and Operations Management
IS - 1-2
ER -